I am 23 and earn Rs 20 lakh annually. I want to increase my monthly investment in mutual funds. Would it be wise to do this via SIPs? I also want to increase my exposure to debt.
18-Sep-2007 •Research Desk
I am 23 and new to investing. I earn around Rs 20 lakh per annum. I hold stocks of ICICI Bank, NALCO, Hindalco, Satyam Computers and Nagarjuna Construction. I also invest in mutual funds and have directed close to Rs 20,000 per month (through SIP) to the following funds: HDFC Equity, Reliance Growth, Sundaram BNP Paribas Select Mid Cap and Magnum Contra. I want to increase this monthly investment to Rs 50,000-60,000 per month. Would it be wise to do this through SIPs? I also want to increase my exposure to debt.
Your desire to increase the debt component is a step in the right direction. A balanced approach to investing is a prudent strategy. But, the need of the hour is the better organisation of your portfolio.
As a first step, you can use the portfolio tool on our website. This will give you an accurate understanding of where your money is invested. Upon conducting this exercise, you will find that your total exposure to companies such as ICICI Bank, NALCO etc is much higher, on account of significant holdings through mutual funds.
Over time, your portfolio will lean more towards the mid-cap space. We will tackle this aberration, simultaneously with your need to increase the debt exposure. Towards this end you can look at directing additional funds to debt-oriented equity schemes through the SIP route. For this we would recommend a look at the category of Hybrid: Monthly Income schemes rather than the Hybrid: Debt oriented schemes. This is because you may not find a 5-star or 4-star rated scheme in the Hybrid: Debt oriented category that would match your investor profile. Moreover, some of the better performing schemes in this category have heavy exit loads. So ensure that you are well informed of the entry and exit loads of the schemes.
As regards the allocation of funds between equity and debt instruments, at your age you can afford a high exposure to equities. But you must evaluate this with respect to your time horizon of investment. Do not allocate funds to equity instruments if you foresee a need for them over the next three to four years. Any residual amount after investing in the debt oriented scheme should be equally divided among your existing mutual fund holdings. Avoid the temptation of adding more funds to your portfolio as the current fund selection is optimal.