Your Fund Portfolio

I am 30 and have invested only in bank fixed deposits and PPF so far. Now, I wish to diversify and have been investing ₹25,000 a month in mutual funds. I have invested ₹5,000 each in Franklin India Opportunities, UTI MNC, ICICI Pru Value Discovery, Tata Ethical and Tata Balanced. Would you consider these to be good choices for a five to 10-year horizon?

Nisha Fernandes

You have done the right thing in starting off with mutual funds. However, your choice of funds is not appropriate. You have chosen schemes from the same house and taken to thematic funds. The picks do not have any specific focus. Also, it would be advisable to have a 10-year horizon; in general, equity funds have delivered extremely well over such a timeframe.

Shift from Franklin India Opportunities to Franklin India High Growth Companies, a high quality multi-cap scheme, and park ₹5,000 in it. In general, thematic schemes may not be suitable for long-term goals, given the entry and exit timings, which may be difficult for retail investors.

But an exception can be made to MNC funds, given their long track record of consistent performance, though smaller sums must be parked in them. You can move from UTI MNC to Birla Sun Life MNC, as the latter has a stronger track record, and invest ₹3,000 in it. ICICI Pru Value Discovery is a quality mid-cap scheme and can be retained with ₹5,000 monthly investments.

Tata Ethical has delivered extremely well over the past several years. But its mandate restricts it from taking exposure to sectors such as banks, tobacco, certain consumption companies and alcohol stocks. The scheme can be retained, but further SIPs can be stopped.

Tata Balanced is a high-quality hybrid scheme and can be continued; but park ₹3,000 in it. Invest ₹5,000 in UTI Equity, a proven large-cap performer. The balance ₹4,000 can be parked in Birla Sun Life Frontline Equity, which invests mainly in large-caps and takes select mid-cap exposure. This portfolio would give you exposure to funds across market-caps. Review the schemes in your portfolio once every year and take corrective action and rebalance, if necessary.

I have been investing in monthly SIPs of ₹10,000 each since 2011 in HDFC Top 200, ICICI Focused Bluechip, Reliance Equity Opportunities and IDFC Premier Equity. I am planning to switch all four scheme to better performing ones such as Franklin India Prima Plus, HDFC Mid-cap Opportunities, ICICI Pru Value Discovery and Mirae Asset Emerging Bluechip. I also invest fully in PPF. Have I made the right scheme choices to switch to? I need about ₹2.5 crore by 2024.

Ram

You have been investing since 2011. If you continue parking ₹40,000 every month in mutual funds and are able to generate 15 per cent returns annually, then you would have about ₹1.92 crore by 2024. You can bridge the gap by increasing investments as and when your surplus increases.

From your present schemes, you can retain ICICI Pru Focused Bluechip as it has been a consistent performer over the past several years. But park ₹7,500 in it.

Add L&T Large-cap and invest Rs 7500 in this scheme too.You can also park Rs 7500 in Franklin India Prima Plus.

Now, you have chosen three mid-cap funds. If you have a high risk appetite, you can invest in them. All of them have proven track records. Invest Rs 4500 each in HDFC Mid-cap Opportunities and Mirae Asset Emerging Bluechip. Normally, two schemes from the same house are not suggested. But an exception can be made in the case of ICICI Pru Value Discovery, a quality performer which invests mostly in mid-caps. You can temper the risk in your portfolio by parking the remaining ₹4,000 in Tata Balanced.

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