I am a 28-year-old investor working as a manager with a scheduled bank in Kerala and my husband is a 31-year-old HR professional. Together, we are investing in the following mutual fund schemes (growth option) every month: IDFC Tax Advantage: ₹13,000 (since 2018), Aditya Birla Sun Life Pure Value: ₹25,500 (since 2018), ICICI Prudential Long Term Equity: ₹3,000 (since 2014), and ICICI Prudential Value Discovery: ₹4,500 (since 2014).

In addition to the above, we have invested ₹5 lakh (one time) in SBI Focused Equity (since 2018).

We are not in need of immediate funds and have long-term wealth achievement goals.

Please advise whether to hold or switch. Also advise whether this is a right time to switch since switching will prevent us from taking advantage of the market low.

Sruthi Babu

There are some observations about your portfolio. For your SIPs, you have chosen to invest in two-tax saving schemes (IDFC Tax Advantage and ICICI Pru Long Term Equity) and two value funds (AB SL Pure Value and ICICI Pru Value Discovery). You have also invested a lump sum in the focussed equity category. Considering that you are saving for long-term wealth creation, your portfolio can be more chiselled.

For your long-term savings through the SIP route, it is best you consider creating a core portfolio of funds from large- and multi-cap categories as well as index funds. Once you do this, you can create a satellite portfolio of funds from other categories such as mid- and small-cap, thematic funds, etc, depending on your investible surplus, your needs, as well as your risk appetite.

Since you are young, ELSS (equity-linked saving scheme) is a good fit for tax-saving purposes. However, if you are already investing in equity mutual funds outside of this, you can maximise investments in debt instruments such as PPF, NSC and NPS for tax-saving purposes. This will diversify your long-term investments by adding another asset class — debt. At best, invest in ELSS only what is short of ₹1.5 lakh (Section 80C benefit) after considering EPF, PPF, NSC, etc.

Keep in mind that from FY20-21 onwards, you don’t need to invest in ELSS for 80C benefits if you choose the new tax regime announced in Budget 2020. This reiterates the need to create a core MF portfolio for long-term goals independent of ELSS funds.

Coming to your funds, SBI Focused Equity in which you have made a lump-sum investment is rated five-star by BusinessLine Portfolio Star Track MF Ratings , while IDFC Tax Advantage is rated four-star. The rest of your holdings enjoy three-star ratings. You can continue your SIPs for the time being.

If you have investible surplus, you can add SIPs in large-cap/index funds to your existing portfolio to take advantage of the market fall. Choose from among funds such as Axis Bluechip, Mirae Asset Large Cap, UTI Nifty Index Fund and HDFC Index Fund - Nifty 50 Plan in the large-cap/index fund categories.

From the limited information available, the proportion of your and your spouse’s investments in each of the funds mentioned is not clear. We are also not sure if both of you are investing in all the funds. Hence, we are not able to re-draw your portfolios to the last detail. As a general rule, it is better if your fund choices are independent, based on your individual risk appetites. Also, it is prudent to not put all your eggs in one basket.

Through the SIP route, I want to start investing in Mirae Asset Emerging Bluechip and L&T Midcap for my children’s education. I plan to invest for a minimum of five years. How do I monitor a fund’s performance and returns in comparison to those of its peers and benchmark?

Ashish Pathrabe

Both Mirae Emerging Bluechip and L&T Midcap are good funds per se, having been rated five- and four-star, respectively, by BusinessLine Portfolio Star Track MF Ratings . While five years is not a short time-frame, it is not too long either.

A prolonged bear market or a sharp fall closer to the deadline can decimate your corpus. For instance, five-year SIP returns for Mirae Emerging Bluechip is at about 3.7 per cent now, while for L&T Midcap, it is negative 2.3 per cent.

If you cannot postpone your goal, it is best to stick to safer recurring deposits.

You can monitor fund performance through our proprietary BusinessLine Portfolio Star Track MF Ratings published every Monday. You can also refer to the fund’s fact sheet uploaded in the website of the respective AMC every month.

Online resources are available as well.

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