Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 13, 2018 Published on February 19, 2017

I am 25, unmarried, with a salary of around ₹55,000 per month. I can save around ₹35,000 per month. At the moment, I am investing through SIP mode in the following schemes: ₹3,000 in DSPBR Mid and Small Cap over the last four months; ₹2,000 in SBI Bluechip, ₹1,000 in HDFC Balanced, and ₹1,000 in Birla Sunlife Dynamic Bond Fund from last month. I do not have any specific investment goals at the moment. Please suggest an ideal portfolio to provide a mix of liquidity as well as wealth creation in the long term.

Sureet Chauhan

It is good that you are beginning your savings at an early age. If held for the long term, returns from mutual fund investments are known to beat inflation and the returns of debt instruments, provided you choose the right funds. While at the moment you many not have any specific goals, you could consider apportioning your savings towards retirement.

Being single and presumably having no liabilities such as home loan, etc., you seem to be able to save 60-65 per cent of your salary every month now. But keep in mind that apart from your routine monthly expenses, you need to set aside some cash for any emergency expenses that may come up. Hence, while we are suggesting a SIP portfolio for ₹35,000 per month currently, you can proportionately reduce the amount in each of the funds recommended, if you require more cash in hand.

All funds you have chosen are good ones, with a stable track record. You can also take up new SIPs in addition. Invest as follows: ₹5,000 each in SBI Bluechip, Franklin Prima Plus, Quantum Long-Term Equity, and ICICI Pru Value Discovery. While the first three are large-cap oriented funds, the last one is a multi-cap fund. Put in ₹4,500 each in DSPBR Small and Midcap and Mirae Emerging Bluechip, two mid-cap funds. The remaining ₹3,000 can be divided equally between HDFC Balanced and Birla Sun Life Dynamic Bond. Since you have a long-term perspective, you may not need a debt fund such as the Dynamic Bond fund. But assuming you haven’t started on any investments in debt instruments, this will provide a good diversification to your savings.

As far as liquidity goes, every SIP in an equity fund is tax-free if redeemed beyond one year from the date of investment. While investment in a debt fund is not entirely tax-free, you need to hold your investments for a minimum of three years for the gains to be considered long-term and avail indexation benefits.

I have been investing in IDFC Premier Equity Fund for the last five years through SIP mode. The fund’s performance has been below par for quite a long time. Is it advisable to continue my SIP or should I sell? Also, is Motilal Oswal Midcap 30 fund a good bet? I am a long-term investor.

Rahul Pathak

It is true that IDFC Premier Equity has been an underperformer with respect to its peers. Assuming that you started your SIPs on February 1, 2012, the fund has given a compounded annual return of 17.71 per cent till date. SIPs in other funds such as HDFC Mid-cap Opportunities Mirae Emerging Bluechip, Franklin Prima, DSPBR Small and Midcap and ICICI Pru Midcap would have clocked returns of 25-30 per cent in the same period.

Considering that this underperformance of IDFC Premier Equity comes at a time when in most of these years mid-cap stocks have fared better than their large-cap counterparts, you can stop SIPs for now.

However, you need not sell your entire investment immediately, as every SIP is locked in for a year, before the gains become fully tax free. Secondly, the fund has seen some challenges in terms of two fund manager changes in the last two years.

Since you are a long-term investor, as far as your existing corpus goes, you can wait it out a bit more to see if the fund pulls up its socks, as the new fund manager’s strategies are put to work.

Being launched only in early 2014, at a time when mid-cap stocks have been on top, Motilal Oswal Most Focused Midcap 30 fund has a short track record. Its tenacity to remain an outperformer across market cycles is yet to be tested. You can avoid investments here as of now. Instead, invest in HDFC Mid-cap Opportunities.

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Published on February 19, 2017
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