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I have an ongoing SIP in HDFC Children’s Gift Fund. I intend to continue the SIP for two years. I am considering investing the equivalent amount as lump sums and discontinuing the SIP. FPIs (foreign portfolio investors) are returning to India expecting a stable government. A global recession would ease commodity prices, ensuring better macros for India. India would attract more foreign money in the event of a global recession. Is this reasoning sound to convert SIPs to immediate lump-sum investment?
Rasesh ChoksiFirst of all, your decision to invest in any scheme must be based on the corpus you wish to accumulate for a goal, the timelines for the target and your appetite for risk. Having chosen a suitable fund, you must stick to it by investing regularly, provided the scheme’s performance is acceptable.
In all market conditions, goal orientation and asset allocation are the two most critical factors in achieving your desired corpus.
To get to your question on the markets, while expectations of a stable government are driving the current rally, it may be prudent to stick to your investment goals and not play the guessing game.
It is not advisable to always follow FPIs. These are large institutions and can exit positions at short notice and can take large losses. But as an individual investor, you cannot afford to take such a risk or a knock in your portfolio.
The best way forward would be to keep investing across market cycles. Lump sums would expose your entire portfolio to market risks.
HDFC Children’s Gift is a quality hybrid scheme, with an excellent long-term record. You can continue investing in it through the SIP route. Try to invest incremental SIPs in the direct plan of the fund to reduce costs and improve returns.
We assume that you are also investing in other schemes and are working towards creating a balanced portfolio for yourself.
I am 24 and single. I work for a private company. My investments are: ₹2,500 in SBI Bluechip, ₹1,500 in Reliance Small Cap, and ₹2,000 in Kotak Standard Multicap.
My aim is to invest for 15 years and generate ₹1 crore. From the coming month, I want to increase my SIP investments by ₹2,000. Please suggest a fund for the amount. Should I stop investing in SBI Bluechip and divert the amount to Reliance Small Cap?
Sandip U Burange
It is good to note that you have started investing early on in your career and also wish to increase the amounts.
A 15-year period is sufficiently long. But reaching your target of ₹1 crore with monthly investments of ₹8,000 (including the additional ₹2,000 that you wish to invest) may be extremely challenging.
If you invest ₹8000 every month and earn returns of 12 per cent annually, you will be able to accumulate a little over ₹40 lakh at the end of 15 years. You need to earn 21 per cent annually if have to reach the goal with your present and new investments. These are unrealistic return expectations. So, temper your expectations and increase your investments periodically to get as close to your goal as possible.
Coming to your portfolio, SBI Bluechip has underperformed its benchmark over one- and three-year time-frames. You can switch to Mirae Asset India Equity, a fund that invests mostly in large-cap stocks and has a solid track record. Invest ₹3,000 in it.
Reliance Small Cap has been a consistent performer in its category. Increase investments in the fund (especially as you have a long horizon), and park ₹2,500 in it. Kotak Standard Multicap is a quality scheme with a consistent record. You can retain the fund and invest ₹2,500 in it.
Review the schemes in your portfolio once a year and take corrective actions as necessary.
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