I am 38-years old, working in an IT firm. I recently started investing via SIPs: L&T India Value - Rs 5,000, SBI Bluechip - Rs 5,000, SBI Small Cap - Rs 5,000, Tata Digital India Fund - Rs 5,000, and L&T Midcap - Rs 10,000. Your views?
Your current portfolio allocation:
- Sector – Technology: 16.67%
- Value: 16.67%
- Large cap: 16.67%
- Small cap: 16.67%
- Mid cap: 33.33%
Reduce exposure to mid and small cap stocks. Increase exposure to large and multi-cap funds. Large cap funds should form the core holding on an investor’s portfolio, while they may not provide outsized returns like small and mid-cap funds may do, they provide good stable returns over the long term.
Stop SIPs into the tech fund.
You work in the IT sector, so your variable pay/ stock options are linked to how the tech sector does. By investing into a technology fund, you further increase your dependence towards how the tech sector does.
I have exposure to following IT sector funds: ABSL Digital India, ICICI Prudential Technology, and Tata Digital India. Should I continue or redeem? My investment horizon is for a maximum 8 months.
We would not recommend investing in equity funds if your investment horizon is only 6-8 months.
If you do need the money after 8 months, we suggest you redeem from the sector funds and park your money into a Ultra Short Duration or a Low Duration Fund.
You can find our analyst views on funds here.
Our view on sector funds
Sector funds can be much more volatile as compared to diversified equity funds. Ideally, a sector/thematic fund should not be more than 5-10% of an investor's portfolio.
Investors should consider them if they have a specific view regarding a sector and are in position to take such a call, especially with respect to entry and exit.
Sector calls are hard to get and best left to a professional manager who has the wherewithal to make such calls.
The chart below articulates why it is so hard to get Sector calls correctly:
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