Scrutinizing the portfolio

By Morningstar |  12-07-19 | 
 

I invested Rs 15,000 in Axis Focused Fund, Rs 7,000 in Mirae Asset Hybrid, Rs 15,000 in Franklin Ultra Short Bond Fund. I can invest up to Rs 12,000 per month. My goals are my sister's marriage (5 years), for a house, children’s education and retirement.

- KS

You seem to have invested 40% of your portfolio in a concentrate fund and another 40% in an ultra-short bond fund. The remaining 20% is invested in an aggressive hybrid fund which gives you a flavor of debt as well as equity. Considering that your goals are fairly long term in nature, it would be best to park your money in a medium to long term / long term fund as opposed to investing in an ultra-short fund. Moreover, it would also be best to diversify your holdings across large, mid and small cap stocks as opposed to investing in a fund which runs a riskier concentrated strategy.

We urge you to compartmentalize your investments in such a way that you assign specific portions of the portfolio to your goals. For example, you could invest in a bucket of 3 funds to be held until you buy a house. This will help ensure that your investments are tailored towards meeting your goals.

You can read our analyst views on the funds here

Could you suggest an aggressive portfolio for 13 to 15 years with a target of Rs 90 lakhs?

Currently:

  • ₹5K - Axis Bluechip
  • ₹5k - Kotak Multicap
  • ₹5k – L&T Emerging Bluechip
  • ₹5k - HDFC Midcap

For a target of Rs 5 crores in 20 years.

  • ₹10K - Mirae Asset Emerging Bluechip
  • ₹10K - SBI Small Cap
  • ₹10k - Parag Parikh Long Term Equity

- Sachin

Most of the funds you have named are fairly well managed strategies and we have a fair amount of conviction on their prospects. Axis Bluechip has an impressive track record of outperformance. Kotak Standard Multi Cap Fund is the largest fund in its category. We think portfolio manager Harsha Upadhyaya is a very efficient stock-picker and has executed this strategy with a lot of finesse. His stock-picking leads him to remain loosely aligned to the benchmark. The manager has been buying into a few mid-cap stocks more recently but has retained its large cap bias. We have a positive rating on this fund.

HDFC Midcap Opportunities is one of the very best at what it does. Portfolio manager Chirag Setalvad ranks amongst the best portfolio managers in the small/mid-cap category. He emphasizes gaining an in-depth understanding of a business before investing. Given the bias for quality stocks, we expect the fund to underperform the competition in market phases when speculative fare is in favour. Nonetheless, over a market cycle, we believe the fund is equipped to serve investors well.

Mirae Asset Emerging Bluechip is managed by Neelesh Surana. The manager has executed the strategy well outperformed most of its peers since inception due to its focus on quality stocks. The fund traditionally has been a mid-cap oriented fund, but is now positioned as a large and mid cap fund driven by the SEBI regulations. The change is however not dramatic as since inception the fund had a 25-30% allocation in large caps.

L&T Emerging Bluechip and SBI Small Cap fund invests at least 65% of its net assets in small-cap stocks. 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, whereby small cap stocks have fallen quite significantly and so have small cap funds. But if you have a long term horizon, small cap funds can serve you well. If these funds meet your investment objective and is a fit in your portfolio, then you may consider investing in it.

Parag Parikh Long Term Equity Fund (Erstwhile Parag Parikh Long Term Value Fund)  is a Multi cap and its distinctive feature is its exposure in international companies. This provides a good hedge against both the rupee and underperformance in the Indian economy.

You can read our analyst views on the funds here.

I have a 20-year investment horizon and investing a monthly SIP of Rs 5,000 in each of these funds:

  • ABSL Frontline Equity
  • HDFC Hybrid Equity
  • ICICI Prudential Bluechip
  • ICICI Prudential Value Discovery
  • Mirae Asset Emerging Bluechip
  • Motilal Oswal Multicap 35
  • SBI Bluechip
  • SBI Small Cap
  • UTI Equity

- Manoj

The funds you have invested in a fairly well managed funds.

ABSL Frontline Equity stands out on many fronts. The fund is managed by an able portfolio manager. he invests largely in stocks chosen from the index and has able to deliver pleasing returns over a market cycle.

HDFC Hybrid Equity is an Aggressive allocation fund that invests in equity, fixed income and cash, but the larger allocation is in equities in the range of 65-80%. The manager continues to be Chirag Setalvad who is an experienced and an old hand at HDFC.

ICICI Prudential Bluechip is a Silver rated Fund. We regard lead manager Anish Tawakley as one of the highest experienced research professionals. The managers have a quality bias when picking stocks maintains a well-diversified portfolio of 50-60 stocks, with lower turnover, demonstrating the team’s patience and conviction in the outcomes of the investment process. The strategy has outpaced its peers across market cycles.

ICICI Prudential Value Discovery has a Morningstar Analyst Rating of Silver. The portfolio manager has been able to prudently navigate the fund’s investment process--whether it is shifting from mid/small caps to large caps or keeping the fund’s valuation focus intact. We continue to draw conviction from the fund manager’s managerial capabilities and research focus. His preference for safety over outsize returns would result in the fund delivering a stable performance over the long term.

Mirae Asset Emerging Bluechip is managed by Neelesh Surana. The manager has executed the strategy well outperformed most of its peers since inception due to its focus on quality stocks. The fund traditionally has been a mid-cap oriented fund, but is now positioned as a large and mid cap fund driven by the SEBI regulations. The change is however not dramatic as since inception the fund had a 25-30% allocation in large caps.

Motilal Oswal Multicap 35 is a multi-cap fund and has a good mix of both large, mid and small-cap companies. Although the fund mandate allows the managers to take higher allocation is mid and small cap stocks, they haven’t breached the limit of 25%. The fund recently witnessed a change in the fund manager and hence one should wait and watch how the new portfolio manager navigate this fund.

You can read our analyst views on the funds here.

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