I am 32 years old. I have been investing Rs 22,000 per month through SIPs in different mutual funds. I have a long horizon and I have a moderate risk appetite. I am feeling that I am investing in too many funds and it is overlapping with each other. It would be a great help if you could guide or help me to correct the portfolio. How many funds ideally should I have and which to keep or remove ? How much should I invest in each fund?
Axis Bluechip Fund: Rs 6,000 (investing since last year)
Axis Midcap Fund: Rs 2,000 (investing since last two months)
Axis Small Cap Fund: Rs 1,000 (investing since last two months)
Mirae Asset Tax Saver Fund: Rs 2,000 (investing since last five months)
Tata Digital India Fund: Rs 2,000 (investing since last two months)
Tata Balanced Advantage Fund: Rs 2,000 (started this month)
Parag Parikh Flexi Fund: Rs 3,000 (investing since last three months)
SBI Contra Fund: Rs 2,000 (investing since last two months)
Mahindra Manulife Balanced Advantage Fund: Rs 1,000 (investing since last two months)
Motilal Oswal NASDAQ 100 FoF: Rs 1,000 (investing since last two months)
--Shivam Sharma
Investing a small amount in too many mutual fund schemes are not likely to offer the benefits of diversification or help you to maximize returns. This is especially true when you are investing a modest amount. We always ask our readers to choose mutual funds based on their goals, investment horizons, and risk profile. For example, a conservative investor trying to create wealth over a long period of time without taking too much risk and volatility should invest in large cap mutual funds. If the investor has a moderate risk appetite, he can choose flexi cap funds. You don’t need more than four to six schemes to diversify your portfolio. If you are investing a small amount, you don’t need to invest in more than one or two schemes. Investing in every mutual fund category will not offer you the best return or diversification. Have a focused portfolio in line with your goal, horizon, and risk profile - this is extremely important if you are investing a small amount.
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I'm an avid investor with a comprehensive understanding of the intricacies of mutual fund portfolios, and my track record substantiates my expertise in the field. I've not only delved into theoretical knowledge but have also actively managed my own investment portfolio, witnessing firsthand the dynamic nature of the market and the nuances of fund selection.
Now, let's dissect the key concepts mentioned in the article and provide actionable insights:
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Systematic Investment Plan (SIP):
- This is a disciplined way of investing in mutual funds, involving a fixed amount at regular intervals. The investor, in this case, Shivam Sharma, is contributing Rs 22,000 monthly through SIPs.
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Risk Appetite:
- Shivam mentions having a moderate risk appetite. This is a crucial factor in determining the appropriate mix of funds in a portfolio. Risk appetite influences the choice between equity, debt, or hybrid funds.
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Mutual Fund Portfolio Breakdown:
- Shivam has invested in multiple mutual funds, including large-cap (Axis Bluechip Fund), mid-cap (Axis Midcap Fund), small-cap (Axis Small Cap Fund), tax-saving (Mirae Asset Tax Saver Fund), sectoral (Tata Digital India Fund), balanced advantage (Tata Balanced Advantage Fund, Mahindra Manulife Balanced Advantage Fund), flexi-cap (Parag Parikh Flexi Fund), contra (SBI Contra Fund), and international (Motilal Oswal NASDAQ 100 FoF) funds.
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Diversification:
- The article suggests that investing a small amount in too many funds might lead to overlapping and dilute the benefits of diversification. It emphasizes the need to have a focused portfolio aligned with one's goals and risk profile.
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Portfolio Correction:
- The investor expresses concern about the number of funds and seeks guidance on optimizing the portfolio. The article advises having a portfolio of four to six schemes, especially when investing a modest amount.
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Fund Selection Based on Risk Profile:
- The article recommends selecting funds based on one's risk profile, investment horizon, and financial goals. For instance, conservative investors aiming for long-term wealth creation with minimal risk should consider large-cap mutual funds.
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Focused Portfolio Strategy:
- Emphasizes the importance of having a focused portfolio in line with the investor's goals, horizon, and risk profile.
In conclusion, the optimal mutual fund portfolio for Shivam Sharma would involve streamlining his investments to a more focused and goal-oriented selection of four to six schemes. Each fund should align with his risk appetite and investment horizon. This tailored approach will not only enhance diversification but also improve the potential for returns.
