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Me and my wife are investing Rs 85,000 per month in following funds for long term (15+ years) with moderately high risk. We want to further invest Rs 40,000. We have 5 funds each in our portfolio.
- ABSL Advantage Fund (5,000)
- ABSL Frontline Equity (5,000)
- Mirae Asset Large Cap Fund (10,000)
- HDFC Mid Cap (5,000)
- Kotak Standard Multicap Fund (15,000)
- L&T India Value Fund (10,000)
- Franklin India Smaller Companies Fund (5,000)
- SBI Small Cap (15,000)
- L&T Infrastructure Fund (5,000 for 3 years)
- Jigar
It’s a well-constructed portfolio with a good mix of growth and value style of investing as well as reasonably good balance in large, mid and small cap segments.
The funds in your portfolio are well managed strategies and you can continue your investments in them.
There is an infrastructure fund in your portfolio. I assume that you are aware of the risks which are attached to such investments. These are sector/thematic funds whose mandate is to invest in the stocks from the underlying sector/theme. If the sector hits a rough patch, the manager doesn’t have the liberty to move his investments to another sector. Such funds are cyclical in nature and can witness prolong phases of underperformance. These are very high risk-high return investment proposition and are typically for those investors who understand the dynamics of the sector and can time their entry and exit from the fund depending on its prospects. Hence, investors should have the stomach for the risks that tag along with such investment. If you meet these criteria, then such funds can continue to be a part of your portfolio (albeit in smaller proportion) to provide an additional kicker and different flavour. If not, then you will be better-off investing in diversified equity funds.
Also, it would be good if you invest some portion of your portfolio in fixed income funds from the perspective of diversification and asset allocation, if you haven’t done yet.
You can read our analyst views here:
Also read:
I'm investing in HDFC Small Cap Fund. I thought of exiting it because I'm investing in Mirae Asset Tax Saver for my retirement corpus which is 30 years ahead. I thought of index funds which have less expense ratio and make huge difference over 20 years. Should I stop investing in HDFC Small Cap and start investing in Nifty 50 for the next 20 years?
- Yuvaraj
The Mirae Asset Tax Saver Fund has a higher focus towards large-cap companies. The fund also holds some mid caps and a very negligible number of small cap stocks. The HDFC Small Cap Fund invests predominantly in small-cap stocks. Both the funds are excellent choices when it comes to including them as a part of your portfolio.
Having said that, from an asset allocation perspective, it’s always important to have a combination of large, mid and small cap funds in your portfolio. Large caps form a core part of the portfolio and mid and small caps are extremely efficient when It comes to diversifying your portfolio across market caps. Tax saving funds are typically used for the specific purpose for saving tax and have a lock in period of 3 years. Given your long term investment horizon it’s important to look at the investment mandate of these funds and look at how suitable these funds are from a risk return perspective.
You can use the SIP calculator in order to evaluate the return on your investments over your investment tenure.
The two funds that you are investing in work very well to complement each other, given that they follow a different style of investing and focus on investing in different segments of the market. Ideally, a good long term portfolio is one in which funds from different segments and with different investment styles complement each other. Index funds have a low expense ratio, but it’s important to understand that this is a passive fund which will track the index that it is benchmarked against. Historically, cumulative long term returns of active have remained higher as compared to passive funds. Passives can be a great kicker to the portfolio, but using them as a standalone in the portfolio may not be the most ideal option.
It's best to speak to your financial adviser to design a portfolio asset allocation model that is best suitable for you based on your risk and return expectations over your investment horizon. A well thought out allocation can act as a cushion when markets turn out of favor for certain asset classes or investment styles.
You can read our analyst's view on HDFC Small Cap.
Also read Choosing between 2 small-cap funds.
I have a high risk appetite. My investment horizon is 10-15 years. Axis Bluechip (Rs 5,000), Mirae Asset Emerging Bluechip (Rs 4,000), DSP Small Cap (Rs 2,000). Since DSP Small Cap has given negative returns I intend to stop and switch to Axis Small Cap. Should I add a multi-cap fund or an aggressive hybrid fund in my portfolio?
- Govind
The funds where you are currently investing into are all well managed funds and we have a fair amount of conviction on their prospects – including DSP Small cap. Small-cap stocks are excellent wealth creators over the long term, though can be quite volatile in the short term. But if you have a long term horizon, small cap funds can serve you well. You can refer to the link below for our top rated funds.
You can refer to our analyst views for more details.
A multi-cap fund and aggressive hybrid fund are suitable for investors with different risk appetites. Multi cap funds invest at least 65% in equities across market cap, but they typically go up to 80-90% in equities. Aggressive Allocation funds have to maintain an equity allocation between 65-80%. Hence, you should understand the asset allocation of the fund and consider your risk appetite and time horizon before taking investment decisions.
You can read specific views here:
