Making portfolio choices

By Morningstar |  07-06-19 | 
 

Guidelines for all queries below:

  • Overall, in an ideal situation, large caps should play an anchor’s role in a portfolio and should comprise around 60% of the portfolio. Mid-caps can be around 25-30% whereas small caps can be around 10-15%. Do note, this is a generalization. Large caps are more resilient during market downturns. Mid and small cap funds, despite intermittent volatility, provide a kicker to the portfolio over the long-term. From an asset allocation perspective, large cap funds add an element of stability to portfolios.
  • Though mid-cap stocks are excellent wealth creators over the long term, they are quite volatile in the short term. Hence, these funds should be invested with at least 7-10 year investment horizon.
  • Do consider the services of a financial adviser.

My SIPs:

  • ICICI Pru Value Discovery: Rs 1,000
  • HDFC Equity: Rs 1,000
  • HDFC Midcap Opportunity: Rs 1,000
  • SBI Bluechip: Rs 700

Should I continue investing in the same? I want to start an SIP for a minimum 5 years.

- Santosh

All the funds in your portfolio are well managed strategies with strong long-term track record. You can continue your investments in them.

To start a new SIP, consider a small-cap fund. But for that, increase your investment horizon to at least 7 years. If the 5-year horizon is sacrosanct, then you should invest in either a large cap or a large & mid-cap fund.

I am 48 years old serving as an Indian Army Officer. Due for superannuation in Feb 2025. Started monthly SIP worth 50K from August 2018 onward which increased to 60K from April 2019. Will increase SIP by 10K yearly till superannuation. Will get pension and terminal benefits.

My funds are (Rs): Kotak Std MC (10K), Mirae A Em BC (12K), PPFAS LTE (12.5K), SBI Small Cap (8K), ICICI Pru NN (7.5K).

- Rohit

Your portfolio, is well diversified across market segments, with large caps accounting for 60%, mid caps at 22% and small caps around 12% of the portfolio.

Having said that, you don’t have an actively managed dedicated large cap fund in your portfolio. Going ahead you may consider having one. Also, there is a scope for a pure play mid cap fund in your portfolio. However, do ensure that the broader diversification framework of your portfolio stays intact.

Currently, the fund you are holding a good choice and you can continue investments in them. Also hope you are aware that ICICI Prudential Nifty Next 50 is a passively managed index fund, which means it will closely track the performance of the underlying index.

From December 2018, I started SIPs in Kotak Standard Multicap (Rs 2,000), Invesco India Contra (Rs 2,000), Reliance Small Cap (Rs 1,000). I am an aggressive investor. My time frame is a minimum 5 years.

Vinod

The funds chosen have different investment mandates.

Kotak Standard Multicap is managed by Harsha Upadhyaya who is a seasoned manager and has managed large-cap as well as mid-cap strategies with reasonable success. The fund has a multicap mandate and has a bias towards large cap stocks with exposure of about 70-75%. The fund runs a higher upside capture ratio while on the other hand has a lower downside risk as compared to its category peers.

Invesco India Contra is a value-oriented contrarian fund and does not have market capitalization restrictions. The fund focuses on the stocks that are fundamentally strong, but currently undervalued or out of flavor, but are expected to do better in future. Investment in contra fund can be riskier compared to the other categories if the markets do not behave the way the fund manager anticipated. This can lead to a huge amount of loss and hence one must seek expert advice.

Reliance Small Cap offers a high risk-high return investment proposition. These funds can get exposed to above average volatility during market downturn or when small-cap stocks lose their sheen. The aptness of this fund in your portfolio and allocation to it would depend on your risk appetite.

My investment horizon is 5 years. My SIPs are (Rs/month):

  • ABSL Tax Relief 96 Fund-ELSS: 2,000
  • Franklin India Prima: 2,000  
  • Axis Long Term Equity: Rs 2,000
  • Canara Robeco Emerging Equities: Rs 10,00
  • DSP Tax Saver Direct-Growth: Rs 1,500

- Sudip

The funds in your portfolio are good. ABSL Tax Relief 96, Axis Long Term Equity and DSP Tax Saver are ELSS funds which not only helps you to save tax, but also provides benefits of capital appreciation. Franklin India Prima is a mid-cap strategy and the exposure to mid-cap stocks typically falls in the range of 70%-80%. We have our highest conviction in this fund.

Canara Robeco Emerging Equities is a large and mid cap strategy. It invests individually between 35-65% in large cap and mid cap stocks which means that at any given time, 70% of the portfolio will have equity equally divided between large cap and mid cap stocks.

We have observed that you do not have pure large-cap fund in your portfolio. Consider one.

I am 37. My investment horizon is 15 years. My SIPs are (Rs/month).

  • Mirae Asset Emerging Bluechip Fund: 10,000
  • Motilal Oswal Multicap 35 Fund: 5,000

(I plan to increase the above two by another Rs 10,000)

  • Invesco India Midcap Fund: 10,000
  • L&T Emerging Business: 10,000

(I plan to increment the SIP for above two by 5,000)

For an 8-year horizon, I plan to invest Rs 10,000/month in Axis Bluechip Fund.

- Jimmy

The funds named are fairly well-managed strategies. You do not have a large-cap fund in your portfolio. Consider one.

I am 35 years old. I invest Rs 2 lakhs per month for child’s education (10 years) and retirement. Mirae Asset Large Cap (Rs 40,000), Kotak Standard Multicast (Rs 40,000), ABSL Equity (Rs 40,000), L&T Mid Cap (Rs 40,000), Franklin India Prima (Rs 4,000)

- Vasudevachetty

The funds mentioned by you are broadly fine.

Kotak Standard Multicap and ABSL Equity are both multicaps. We recommend staying with Kotak Standard Multicap Fund. This fund has a noteworthy long-term track record and is managed by a very experienced manager. You could decide to terminate your SIP in the other. There is no need to redeem your investments.

Instead, you can consider adding another large-cap fund.

You can consider allocating some portion of your investments to a small-cap fund.

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ANIL KUMAWAT
Jun 17 2019 04:51 AM
I am 32 year old aggressive investor having investment horizon of 20 years. My portfolio consists NPS 7L in aggressive scheme with HDFC PMC, around 1L in FD & 1L Cash. I have ELSS investment of 3L in AXIS LTE, 1L in ABSL Tax Relief 96 & 1L in IDFC TAX Advantage fund through regular SIP of 3 years. Just now I created a portfolio for long term goals. My SIP Portfolio consists: HDFC Small cap, SBI small cap, L&T mid cap, MIRAE AE Bluechip, KOTAK standard multicap, MIRAE Asset Hybrid Equity fund (4K each), MIRAE Asset Tax saver fund (2K). Please suggest if any change requires.
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