Mutual Funds

Your Fund Portfolio

Parvatha Vardhini C | Updated on January 11, 2018

I want to invest ₹5,000 per month in mutual funds through SIPs for at least 3-5 years. I am 30 years old and am already investing in PPF and Post Office RD. I have chosen a few large-cap funds — SBI Blue Chip, Mirae Asset India Opportunities, Motilal Oswal MOSt Focused 25 and ICICI Prudential Focused Bluechip Equity. Please advise which of the above will be good for SIP. Further, I want to invest ₹1 lakh in lumpsum in any fund which will give me maximum return.

Anjali Modgil

Regular investment through SIP is an ideal savings vehicle for long-term goals such as building a house, funding higher education of a child or retirement. That said, it is not clear why you have talked of a 3-5 year horizon. Considering that mutual funds are market-linked products, a short-term horizon pegs up the risk of underperformance or loss of capital.

Besides, you are also looking to begin your investments at a time when the market has already moved up sharply over the last three years and is perched at a peak. Thus, the risk of downside from here is a bit more.

If you don’t have any specific need to be met 3-5 years later and can extend your horizon, begin investing through SIPs in equity funds. For the ₹5,000 that you want to invest every month, it is enough if you choose two funds. You can invest ₹2,500 each in SBI Bluechip and ICICI Pru Focused Bluechip Equity. Both are solid large-cap oriented funds with a reliable track record.

By virtue of its ‘Opportunities’ tag, Mirae Asset India Opportunities may tend to take a multi-cap approach, although it has leaned towards large-caps so far. Motilal Oswal Focused 25 fund has been a good performer so far, but it is just three years old and does not have a track record across market cycles.

Regarding the lumpsum investment, it may not be a good idea to invest a lumpsum directly into a fund at a time when market is touching new highs. You can rather invest the money in a liquid fund and do a systematic transfer of a monthly amount to an equity fund, just like a SIP. Keep in mind that to do a systematic transfer, both the source fund (i.e. the liquid fund) and target fund (i.e. the equity fund you want to invest in) should be from the same fund house.

You can choose either Birla Sun Life Frontline Equity or Franklin Prima Plus for the same. These two are equity funds which predominantly take exposure to large-cap stocks and boast of a good track record.

While these funds sport good compounded annual returns of 19-20 per cent over the last five years, this may not be the ‘maximum return’ that you have mentioned in your query. Returns are directly a proportion of the risk you are willing to take on. You have also not stated the time period for which you will be willing to stay invested for the lumpsum.

These two funds have been suggested considering their stable performance across market cycles as well as because you are a beginner to MF investing. It is suitable for someone with a moderate risk appetite.

I have been investing ₹4,000 in ICICI Prudential Value Discovery (Direct growth) and ₹3,000 in DSP Black Rock Micro Cap fund for the last 18 months. Can I continue to invest in these funds to maximise my returns to ₹6 lakh in five years? If not, please suggest other funds to reach my goal.

Sai Venkat

For a corpus of ₹6 lakh in five years, you need to roughly invest ₹7,500 a month, assuming your investments earn a compounded annual return of a reasonable 12 per cent. It is assumed you are looking to achieve your goal five years from the date of first investment 18 months ago. As against the requirement of ₹7,500, you have been investing ₹7,000. Considering that your investments have yielded more than the assumed 12 per cent in the last 18 months, you are on the safe side so far.

While SIPs in the Value Discovery fund in the last 18 months have returned 15 per cent, SIPs in the DSPBR Micro-Cap fund have given a much higher 33 per cent.

But no one can second-guess the market and hence, it would be safe if you increase the total SIP amount by ₹500 in future. Secondly, small-cap stocks may be in for a correction in the near to medium term. Your horizon of five years too is not too comforting.To bring down risk, stop SIPs in DSPBR Micro-cap and switch to DSPBR Opportunities. Divide ₹7,500 equally between this fund and ICICI Pru Value Discovery.

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Published on July 09, 2017

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