I have been investing in Axis Mid Cap Fund for almost two years. My original plan was to invest in this fund for five years, but the fund has not been performing well in the last one year. Should I continue with this fund?

I also want to start a new SIP for my child’s education. She is three years old. I am planning to invest ₹1,500-2,000 a month for five years.

Vinit Nazare

Over longer terms of three and five years, Axis Mutual Fund has beaten its benchmark, the BSE Midcap, by 3-8 percentage points. It is only in the last one year that it has underperformed, clocking about 1 per cent return compared with the benchmark’s 12 per cent.

With prices of mid-cap stocks zooming since the rally that began in mid-2013 and markets also turning choppy, the fund has adopted a conservative stance in the last one year by increasing allocations to defensive segments, such as consumer non-durables and pharma.

But these segments underperformed other stocks from the cyclical and industrial space in the last one year.

With the mid- and small-cap space being clearly overheated now, it may be in for deeper corrections.

The fund’s defensive stance may pay off then by helping contain losses. Hence, you could probably wait and watch for another six months to a year before you decide to shift.

That said, it is not clear why you have chosen a mid-cap fund as your only investment. It is better to invest in large-cap funds or even equity-oriented balanced funds if you are looking to invest small sums in one or two funds for a limited term of five years. Again, if you have short-term financial needs to fund your child’s education you can probably invest in balanced funds (equity-oriented), such as Tata Balanced or L&T Prudence.

If you don’t have any pressing near-term need, it is better to set long-term financial goals and increase your allocations to mutual funds steadily over the years to build a decent corpus.

For instance, you can have the higher education of your child itself as a financial goal to be met when she is 18.

Over the years, as your income increases, you can increase the investment amount and spread it across more funds as well.

I am 47 and I started investing in mutual funds recently. I am investing through SIPs of ₹3,000 each in HDFC Prudence and HDFC Balanced and ₹4,000 in Tata Balanced. Please advise if I should continue with these funds.

I want to invest another ₹10,000 a month through SIPs. Please suggest some good funds.

Rajesh Kumar Ch

If you are saving for the long term, with a horizon of at least 8-10 years in mind, you need not be too conservative to only invest in equity-oriented balanced funds. You can add some diversified funds to give a boost to your returns.

This will also help you build a bigger corpus as you move closer to retirement. Including the additional ₹10,000, you will be allocating a sum of ₹20,000 a month towards SIPs.

Split this amount as follows: Invest ₹4,000 each in Birla Sun Life Frontline Equity, Kotak Select Focus and Quantum Long-Term Equity.

While the first two are large-cap oriented funds which take about 15-20 per cent exposure to mid-cap stocks, Quantum Long-Term predominantly sticks to large-cap stocks.

Another ₹3,000 a month can be invested in Franklin Flexi-cap, a multi-cap fund. The remaining ₹5,000 can be equally split between HDFC Balanced and Tata Balanced.

This portfolio ensures that 60 per cent of your investments go into less volatile large-cap oriented funds which give stable returns and 25 per cent goes into safer balanced funds. This allocation has been suggested keeping your age in mind.

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