Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on May 31, 2020

I am 33 years old and I can take moderate to high risk. I currently invest every month in SBI Small Cap (₹2,500), DSP Midcap (₹1,000), SBI Focused Equity (₹1,500), SBI Blue Chip (₹1,000), Aditya Birla SL Tax Relief ’96 (₹1,000), Mirae Asset Emerging Bluechip (₹2,000) and Axis Bluechip (₹2,500). I used to invest in Axis Ultra Short Term Fund. Due to the CovidD-19 crisis, I undertook the following actions in my portfolio: Stopped my SIP in debt fund (Axis Ultra Short Term Fund) and diverted that amount to equity MF; paused my PPF for the time being and diverted that amount to equity MF.

After the above, I am left with about ₹6,000 per month of extra which I can invest. Now, please suggest if I should invest this ₹6,000 as a step-up SIP in any of the existing funds. I was also planning to invest in DSP Nifty Next 50 and Motilal Oswal NASDAQ 100 Fund of Fund. Are these the right choices considering my existing portfolio? Will investing in any more funds dilute my portfolio?

Sridip Das

You currently invest about 30 per cent of your portfolio each in large-cap funds (SBI Blue Chip and Axis Bluechip) and mid- and small-cap funds (SBI Small Cap and DSP Midcap); about 17 per cent in the large- and mid-cap category (Mirae Asset Emerging Bluechip) and about 22 per cent in other categories (Focussed Equity and ELSS). This allocation suits a moderate risk appetite. All the funds you hold are rated either 4-star or 5-star by BL Portfolio Star Track MF Ratings.

You can continue to invest in these funds for the time being.

About stopping your other investments in Axis Ultra Short Term fund and PPF (public provident fund) and redirecting them to equity funds, there is no harm in moving from a debt fund to a equity fund since you have anyway stated that you can take moderate to high risk. Equity mutual funds as a category entail higher risk than debt mutual funds as a category.

However, the pausing of investments in PPF is not advisable. Even if you opt for the new tax regime where you can’t claim Section 80C benefit, you must continue your PPF investment. Firstly, it offers diversification into another asset class. Secondly, PPF is entirely risk-free.

Additionally, it gives tax benefits at all three levels — initial investment (if you choose the old regime), interest and maturity — and also earns decent returns.

You currently invest ₹11,500 through SIPs currently; we assume this is inclusive of the redirected sums from the Axis Ultra Short Term Fund investment as well as PPF.

If that is the case, you can direct the necessary sums from the additional ₹6,000 that you have mentioned you can spare every month, to PPF.

Any surplus after redirecting to PPF can be spread across your current holdings itself.

Since you can take moderate to high risk, deploy the additional sums in SBI Focused Equity and Mirae Emerging Bluechip.

Coming to the new funds , whether a choice of fund is right or wrong depends on your risk-return profile as also the period for which you want to invest. That investing in more funds dilutes your portfolio cannot also be said with absolute certainty.

Investing in the same category of funds may not give diversification benefits. But you are suggesting an index fund and an international fund — categories to which you don’t have exposure to. The Nifty Next 50 index represents companies that have the potential to be future bluechips.

These firms could be a good via media between highe-risk mid-cap stocks and bellwether stocks. The Nasdaq 100 Fund of Fund from Motilal Oswal, too, is a good route to own a slice of the US markets. You can, hence, go ahead with these investments.

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Published on May 31, 2020

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