Getting the right mix of funds

By Morningstar |  06-05-19 | 
 

Morningstar recommends that readers consult their financial advisers. Below are just broad guidelines. You can view our fund analyst reports here and check performance of funds here.

I invest Rs 4,000/month into funds. My target is to create wealth of Rs 15 lakhs in 10 years. Should I stay in Kotak Small Cap?

- Khirod

In order to comfortably meet your goal, you will need to increase your monthly SIP amount by 20% ever year. Kotak Small Cap is a well-managed strategy. Last year was a bad year for mid and small cap stocks as they corrected quite sharply. We recommend a long-term investment horizon in small caps to make the most of these investments. Since you have a 10-year horizon, you can stay invested in the fund.

I have been investing via SIPs, but all are underperforming. Should I switch? DSP Small Cap / ABSL Equity / Reliance Small Cap / IDFC Focused Equity.

- Divakar

The funds are fine. You have 50% of your portfolio in small-cap funds. This is not an ideal allocation, even if you have an aggressive risk profile with a long-term horizon. We recommend bringing your small and mid-cap allocation down to 25-30% and increase your exposure to large and multi-cap funds.

I want to achieve Rs 1 crore in 10 years. Monthly SIPs are into Mirae Asset India Equity (Rs 10,000), Tata Digital India Fund (Rs 3,000) and L&T Emerging Business (Rs 3,000). 

- Lokendra

To meet your goal, we suggest SIPs of Rs 20,000/month and increase it by 22% every year.

Tata Digital corners a substantial part of your portfolio. Reduce sector fund allocation to a maximum 10% (going by the above figures, it is almost 19%). You can add some mid-cap exposure instead.

In the hybrid aggressive equity category, I wish to invest Rs 3 lakhs each in HDFC Hybrid and IDFC Core equity funds with the targeted return of 15% in three years. 

- Prashant

Your target return is very aggressive and the time horizon, inadequate.

Hybrid aggressive fund typically invest 65-80% in equities and the rest in fixed income. Historically, equity funds have delivered significant returns over the long term (10+ years) but 36 months is too short a period and the returns could be negative over this time frame. As you increase your time horizon, the probability of making losses reduces. We recommend increasing your investment time horizon to at least 5- 7 years.

HDFC Hybrid is a well-managed aggressive allocation fund and you can consider including the same in your portfolio. IDFC Core Equity is a Large & Mid Cap fund with a bias towards Large Cap stocks. The fund is managed by Anoop Bhaskar and is amongst one of the better equity managers in the India industry. You can consider adding exposure to this fund.

I need to save for my child’s education (15 years) and retirement (20 years). Total monthly SIP amount is Rs 20,000, Rs 4,000 in each of the below funds. Do I need to add a hybrid or debt fund?

  • Kotak Standard Multicap
  • Mirae Asset India Equity
  • ABSL Equity
  • Mirae Asset Emerging Bluechip Principal Emerging Bluechip

- Amol

The funds you have in your portfolio are well-managed strategies and we don’t see the need for any tweaks. While you don’t have a mid-cap fund in your portfolio, the underlying holdings of these funds give you adequate exposure to small and mid-cap stocks, so the overall allocation seems to be in line.

Increase your SIP amounts by 10-15% every year so that you can accumulate a significant corpus to meet your goals.

I am investing in funds for long-term wealth creation. I am also planning to increase my contribution. Which funds should I increase it to?

  • SBI Bluechip: Rs 1,000
  • Axis Long Term Equity: Rs 1,500
  • ABSL Banking and Financial: Rs 1,000
  • Motilal Oswal Multicap 35: Rs 1,000
  • HDFC Hybrid: Rs 2,000
  • ABSL Frontline Equity: Rs 1,000

- Ganesh

If you have at least a 7-10 year investment horizon, you can add mid-cap exposure up to 20% of your portfolio.

I want to build retirement corpus which is about 23 years away. These are my SIPs:

  • Kotak Standard Multicap: Rs 4,000
  • Mirae Asset India Equity: Rs 6,000
  • L&T Midcap: Rs 5,000
  • Reliance Small Cap: Rs 5,000

- Bablu

We recommend reducing the small and mid-cap exposure to overall 40% of your portfolio. This can be reallocated to the Kotak Standard Multicap Fund. Large & Multi cap funds should ideally form the core holding of any investor’s portfolio. While they may not be huge wealth creators such as small/Mid cap funds, from an asset allocation perspective, large cap funds add an element of stability to portfolios.

My time horizon is 15 years: SBI Bluechip, SBI Magnum Multicap, SBI Small Cap.

- Saurabh

SBI Bluechip and SBI Small Cap are well-managed strategies. SBI Magnum Multicap is managed by Anup Upadhyay who took over the fund management responsibilities two years ago. We are yet to build conviction on this strategy.

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jilbin george
Jul 27 2019 07:31 AM
Hello,
My goal is long-term wealth creation and my horizon is 33 years. These are the funds I have SIPs investing in:
HDFC Small Cap: Rs 8,000
DSP Midcap: Rs 10,000
Mirae Asset Large Cap: Rs 12,000
Canara Robeco Emerging Equities: Rs 10,000
SBI Equity Hybrid Fund: Rs 10,000
I have also being investing in Tata Hybrid Equity for the last 5 years, but just stopped due to dismal returns. However, I have not yet redeemed the funds I invested and plan to leave it there for at least another year. Is my asset allocation ok? Any other advice would be appreciated.
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