Mutual Funds

Your Fund Portfolio

Dhuraivel Gunasekaran | Updated on August 18, 2019 Published on August 18, 2019

I am 31 years old and work for a private firm. I have been investing in the following mutual funds from Febuary 2019 through SIPs: Axis Bluechip (Direct Growth) - ₹2,000; ICICI Prudential Nifty Next 50 Index (Direct Growth) - ₹1,000; HDFC Small Cap (Direct Growth) - ₹1,000. Do I need to make changes to my portfolio or add other funds? My time horizon is 15 years and my risk profile is moderate.

Varun Prakash R

It is good that you have started investing at a young age. Given your time horizon of 15 years and a moderate risk profile, it would be better to have a more balanced asset allocation, spread across large-, multi-, mid- and small-cap equity funds.

Considering your current portfolio, the investment made in two of the funds — Axis Bluechip and ICICI Prudential Nifty Next 50 Index — provide exposure to the top 100 large-cap stocks, while HDFC Small Cap gives you exposure to the small-cap spectrum.

Axis Bluechip is one of the best-performing, actively managed funds in the large-cap category. It has been rated five star by BusinessLine Portfolio Star Track Mutual Fund Rating. Funds that are rated five star and four star are considered good mutual funds to invest in.

ICICI Prudential Nifty Next 50 Index is a passively managed mutual fund scheme that tracks the Nifty Next 50 TRI Index. The index represents the balance 50 companies from the Nifty 100 Index after excluding the Nifty 50.

This fund helps participate in the next rung of the 50 most-liquid, emerging stocks after S&P CNX Nifty large-cap stocks. Over the last five years, the Nifty 50 TRI Index and the Nifty Next 50 TRI Index have delivered a CAGR of 9 per cent and 11 per cent, respectively.

Apart from the returns, the efficacy of index funds is measured through the tracking error, which shows how closely an index fund tracks its chosen benchmark. Index funds with lower tracking errors are the preferred choices.

ICICI Prudential Nifty Next 50’s daily tracking error calculated from its past one year’s NAV history was at 0.03 per cent, lower than the average 0.04 per cent of index funds. Hence, you can continue holding this fund.

HDFC Small Cap has exposure of at least 65 per cent to small-cap stocks. The fund has been rated three star by BusinessLine Portfolio Star Track Mutual Fund Rating, given its relatively low rolling return score over the past seven years. The recent performance of the fund has been good. You can wait to see if its performance improves over the next six months.

Since you have exposure to large- and small-caps, you can add funds from the multi- and mid-cap categories. Mid-cap funds will help you own emerging companies’ stocks with better chances of scaling up, while the multi-cap funds will give you tactical allocations in large-, mid- and small-cap stocks.

ICICI Pru Value Discovery, which follows a value-investing approach, is a good choice in the multi-cap category. For mid-cap exposure, you can consider L&T Midcap. Both funds have been rated four star by BusinessLine Portfolio Star Track Mutual Fund Rating.

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Published on August 18, 2019
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