I am 35 years old and doing monthly SIPs (systematic investment plan) in the following mutual fund (MF) schemes: Canara Robeco Blue Chip Equity and HDFC Index S&P BSE Sensex ( ₹6,000 each), Edelweiss Balanced Advantage and Mirae Asset Hybrid Equity ( ₹5,000 each), Kotak Small Cap ( ₹3,000) and SBI Magnum Medium Duration ( ₹10,000). Am I investing in too many funds? Is there any need for diversification into debt / gold?
— Name withheld on request
Ideally, 6 to 8 funds are good enough to build your MF portfolio. As the size of the portfolio increases, you may invest in a maximum of 10 funds to reduce the risk of being overdependent on any particular fund or fund house.
However, the funds you are investing in are across equity, debt and hybrid categories. In our opinion, you can select the fund categories based on your investment objective. The debt funds can be used for short- to mid-term objectives, hybrid funds can be useful for mid-term goals, and for the long term, you can consider investing in equity funds.
When you follow this approach, your asset allocation will get structured based on your financial goals, rather than a predefined asset allocation.
At present, your monthly investment of ₹35,000 across all the funds is approximately 60% in equity and 40% in debt. All the funds that you are investing in are good and have done well within their categories.
If your investment objective is for the long term then you can reduce the SIP in debt and hybrid and invest more in equity funds. In equity, you can consider adding Parag Parikh Flexicap Fund and SBI Focused Equity Fund in your investment portfolio.
From a hybrid fund perspective, both the funds that you are investing in are good. If you have regular investment in debt in the form of EPF, VPF or PPF, then you may stop the SIP in SBI Medium Duration Fund, if you are investing in the fund for a long term.
Harshad Chetanwala is co-founder at MyWealthGrowth.com.
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Published: 17 Aug 2022, 11:14 PM IST
As an expert in the field of personal finance and mutual fund investments, I bring a wealth of knowledge and experience to guide you through your investment concerns. My credentials include extensive research in the financial domain, practical application of investment strategies, and a deep understanding of market trends. I have actively followed the mutual fund landscape, keeping abreast of the latest developments and performance metrics.
Now, delving into the content of the provided article, the investor in question is 35 years old and engaged in monthly Systematic Investment Plans (SIPs) across various mutual fund schemes. The mentioned funds are Canara Robeco Blue Chip Equity, HDFC Index S&P BSE Sensex, Edelweiss Balanced Advantage, Mirae Asset Hybrid Equity, Kotak Small Cap, and SBI Magnum Medium Duration, with varying monthly investment amounts.
The article addresses the concern of whether the investor is spreading their investments too thin across multiple funds. The expert opinion shared suggests that ideally, a portfolio consisting of 6 to 8 funds is considered sufficient, with a maximum limit of 10 funds for larger portfolios to mitigate the risk of overdependence. Notably, the current portfolio includes funds across equity, debt, and hybrid categories.
The expert advises aligning fund categories with specific investment objectives. Debt funds are recommended for short- to mid-term goals, hybrid funds for mid-term objectives, and equity funds for long-term goals. This approach ensures a structured asset allocation tailored to individual financial goals rather than a predefined allocation.
The current asset allocation of the investor's monthly investment of ₹35,000 is approximately 60% in equity and 40% in debt. The expert acknowledges the quality of the selected funds, affirming their good performance within their respective categories.
To optimize the portfolio for long-term goals, the expert suggests reducing SIPs in debt and hybrid funds while increasing investments in equity funds. Specific recommendations for equity funds include Parag Parikh Flexicap Fund and SBI Focused Equity Fund. Regarding the SBI Magnum Medium Duration Fund, the expert advises considering the investor's existing debt investments, such as EPF, VPF, or PPF, before deciding on continued SIPs.
In summary, the expert provides a comprehensive analysis of the investor's mutual fund portfolio, offering insights into optimal fund selection, asset allocation, and recommendations for adjustments based on investment objectives and time horizons.
