Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 19, 2018

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I am 23 and wish to invest about ₹15,000 a month through SIPs. I have a high risk appetite. I wish to include one tax-saver scheme, one or two small-caps and one large-cap scheme. I’m looking at a horizon of three to five years. My options include Axis Long-Term Equity, Motilal Oswal Focused Midcap 30 and Franklin Smaller Companies. Am I on the right track?

Ashwin Toshniwal

It is appreciable that you are sparing a thought for savings quite early in life. Investing a regular sum in SIPs every month is one of the best ways to build a corpus for long-term goals, such as retirement.

But having said that, it is not quite clear why you have a horizon of only three to five years. If you have earmarked this investment towards any financial goal or big-ticket expenditure coming up three to five years from now, it is best to stick to safe investments in debt instruments, such as FDs. This is because three to five years is a short time-frame for equities and it pegs up the risk quite a bit, especially, for small-cap funds that have had a good run in the last one to two years.

If the ongoing correction continues for some more time, these funds may be prone to higher erosion in their net asset values. A short investment horizon may not give them enough time to recover and deliver good returns.

Besides, every SIP in a tax-saving fund also has a lock-in period of three years.

If you can extend your horizon beyond the three to five years you have in mind now, you can split the ₹15,000 as follows: Invest ₹4,000 in Axis Long-Term Equity for tax savings purposes and ₹5,000 in Kotak Select Focus, a top-performing large-cap fund. The remaining ₹6,000 can be divided equally between Franklin Smaller Companies and SBI Magnum Midcap. Although among the top performers in the last one year, Motilal Oswal Focused Midcap 30 was launched only in February 2014, when the rally in mid-cap stocks was just beginning. It is yet to see a full market cycle. Investments can, hence, be avoided in this fund.

Published on January 31, 2016

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