Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on August 09, 2020 Published on August 09, 2020

I’m 25 years old and have been investing in mutual funds for the past two-and-a half years. The funds I invest in are: Tata Equity PE, L&T India Value and Aditya Birla Sun Life Frontline Equity. I started in January 2018, and invest ₹1,000 per fund each month in the growth plan. I was employed when I began investing but I’m now pursuing higher education and cannot increase the amount of investments as of now. Please review my portfolio and advise if I should continue investing in these funds or if I should switch to better-performing funds.

Sai Sandhya

It is appreciable that you started investing early and continue to invest even after taking a temporary break from employment. SIP investments can be used to build wealth for long-term goals such as buying a house or for retirement.

You have made a small beginning, but can step up your SIPs as and when your investible surplus increases.

Coming to your portfolio, there are some observations. Considering that the market has been volatile, your SIP returns are as follows: Tata Equity PE – minus 0.19 per cent, L&T India Value – minus 1.07 per cent, and Aditya Birla Sun Life Frontline Equity – minus 0.23 per cent. The returns have been calculated assuming your SIPs are done on the first of every month from January 2018 until August 2020.

But two-and-a-half years is too short to judge the returns of equity funds. One needs a time-frame of at least 7-10 years for the schemes to ride out market volatility and deliver good returns.

As regards your choice of funds, two out of the three that you have chosen — Tata Equity PE and L&T India Value — are in the ‘value’ category. Value funds typically hunt for cheap stocks which have the potential to give good returns over the long-term.

Although both the funds you hold are rated five-star by BusinessLine Portfolio Star Track MF Ratings, it is enough to have one fund in this category. You can stop the SIPs in one of them and redirect the ₹1,000 to Mirae Asset Emerging Bluechip, a scheme from the large- and mid-cap category which has a good track record.

Aditya Birla Sun Life Frontline Equity is a large-cap fund. It has been an underperformer in the category and is rated three-star by BusinessLine Portfolio Star Track MF Ratings. You can continue the SIPs in it for another six months.

If the underperformance continues, stop the SIPs here and move them to Axis Bluechip, a large-cap fund rated five-star by Portfolio Star Track MF Ratings.

I am 38 years old and self-employed. Following are my lump-sum investments in SBI mutual fund schemes — SBI Corporate Bond: ₹20 lakh, SBI Equity Hybrid: ₹5 lakh, SBI Savings: ₹5 lakh, and SBI Liquid: ₹2 lakh. Can you advise on my portfolio?

Saravanan Panneerselvam

All your investments are in one fund house — SBI Mutual Fund. It is always a good idea to diversify your holdings across fund houses to spread the risk.

Also, each of them will have their own unique styles of management which you can benefit from if you invest across different asset management companies (AMCs).

Since we don’t have any information on the purpose for which you are saving in these funds for, as well as the timeline for investment, we are unable to comment on their overall suitability.

Hence we are restricting our comments to the individual funds.

SBI Corporate Bond is a relatively new fund in the category, having been launched in February 2019.

It is unrated by BusinessLine Portfolio Star Track MF Ratings.

You need to keep a close eye on its performance vis-à-vis peers and take a call in case of prolonged underperformance.

SBI Equity Hybrid has been a top performer in the aggressive hybrid funds category over longer time-frames of three and five years. It is rated five-star by BusinessLine Portfolio Star Track MF Ratings. You can continue holding your investment in it.

SBI Equity Savings Fund is a little over five years old. It is unrated by BusinessLine Portfolio Star Track MF Ratings.

It is a middle-of-the-road performer in the category, over three- and five-year periods.

You can continue to hold the investment in it as of now, but keep a close watch for any slippage in performance.

Usually, liquid funds are used as a temporary parking space either for regular transfer to another fund through the SIP mode or for holding emergency cash.

It is not an ideal vehicle for long-term investment.

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Published on August 09, 2020
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