I stated investing Rs 13,000 ever month in SIPs in the funds listed below with an investment horizon of 10-15 years. I also have a PPF account where I invest Rs 70,000 each year besides small fixed deposits and insurance plans. I want your view on the mix of funds and if I should increase my SIP investments?
- Sugato Bhattacharjee
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You have nine funds in your portfolio. And as you can see, many of these have overlapping investment themes. For instance you have two large- and mid-cap funds, three mid- and small-cap funds and two multi-cap funds. Diversification across funds works when planned for and in funds that have different objectives. A good selection of a few funds should work equally well if you are seeking long-term wealth creation.
You should consider reducing your holdings to 4-5 funds at best. You should immediately get out of Magnum Global, despite it doing good in the last one year, which is more to do with the way the markets have moved in the past one year. Likewise retain one of the multicap funds; HDFC Equity instead of ICICI Dynamic fund. Likewise you should gradually reduce your large- and mid-cap holdings to one and mid- and small-cap holdings to not more than two funds. Your selection of a banking sector fund is helping the combined portfolio gain.
However, we are unable to understand your fondness to max the PPF investment, especially when you come across as a risk taker with so many fund investments. You would have been better placed if you had considered investing in ELSS instead of the assured 8 per cent return that a PPF offers without losing on the tax benefits under Section 80C. Likewise instead of fixed deposits, you should consider committing your savings in liquid funds that yield better returns compared to FDs and are have a tax advantage.
Last, you need to have a financial goal, something that you are saving for. Increasing SIP contributions is worthwhile if you have investible surplus. Instead of looking at fresh investments, you will benefit investing additional sums into your existing fund portfolio. And make sure to track the performance of your fund portfolio at least once a year. This way, you will be able to exit funds non-performing funds and evaluate the progress of your investments.
This article was originally published on November 09, 2010.
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