I am an aggressive investor. I want to create a huge corpus over the next 20 years. I invest around Rs 11,000 in SBI Bluechip, SBI Magnum Midcap and Reliance Small Cap.
I have now zeroed in on Principal Emerging Bluechip. Is it a good investment over 18 - 20 years?
- Rahul
You do have a good set of funds in your portfolio. In addition, it’s a good mix from different categories. However, we also notice that you have two funds from the same fund house. Good diversification is across fund styles and fund houses.
We think adding a multi-cap fund makes sense. Multi-cap funds give flexibility to the manager to choose pockets of the market where he senses the best opportunities are and are not tied down by market cap biases.
Principal Emerging Bluechip is from the Large & Mid-Cap category. This entails that the fund will maintain at least 35% of its portfolio in large-cap stocks and another 35% of its portfolio in mid-cap stocks fund. This in effect makes the fund less flexible than a pure multi-cap fund.
The fund has been a reasonable performer over the years. The manger has typically maintained a 40-45% allocation to large-cap stocks and the remaining in small and mid-cap stocks. It is important to note though, the fund has done a wonderful job of capturing market upsides (as can be witnessed in its 5 year Up Capture Ratio of 127), but at the same time the fund has also fallen significantly in market downturns (Down Capture Ratio of 92). This can also be witnessed in the fund underperforming in the recent market volatility of 2018. Such funds will tend to be more volatile than some of their peers. You could be attuned to bearing interim volatility in the fund, but as long as your time horizon is for the long term, there should be no issues.
Since you have a 15-year investment horizon, we would also urge you to consider looking at small-cap funds, as long as your risk objectives allow you to do so. Small-cap stocks are excellent wealth creators over the long term, but also can be quite volatile in the short term. 2018 is a classic case in point, where by small cap stocks have fallen quite significantly and so have small cap funds. But if you do indeed have a long-term horizon, small cap funds can serve you well.
Whether you want to invest in a pure-play multi-cap or small-cap fund, you can look at our rated funds here.
You can access more information on Principal Emerging Bluechip here.
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