Ask Morningstar: Do you need 2 flexi-cap funds in your portfolio?

May 27, 2022

From April 2021, I started investing Rs 2,500 in PGIM India Flexi Cap. And from February 2022, I added another fund, Parag Parikh Flexi Cap. My total SIPs are Rs 5,000.

I added Parag Parikh because they were investing in foreign equities before the new SEBI guidelines. Is it good to have two flexi-cap funds? Or keep only one scheme because amount is not too big. If yes, then which one I should pick? My investment horizon is 10 years.

To start with, let me clarify that SEBI’s restriction on overseas investments comes because of the fund houses touching the overall investment limit of $7 billion. This is owing to the increased inflows that these funds have witnessed. Considering that the restriction is temporary, we think that it’s important to wait until such time that we see how this pans out.

PGIM Flexi Cap carries a slightly higher exposure towards small and mid-cap stocks as compared to Parag Parikh Flexi Cap. The PGIM fund invests in growth stocks with sustainable business models. The Parag Parikh fund aims to invest predominantly in large-caps stocks with a long-term investment horizon.

I remember advising another reader about having two flexi-cap funds in a portfolio. I reiterate what I said in When 2 flexi-cap funds in a portfolio make sense. Although both the funds fall in the same category, the two funds are very distinct in terms of their holdings, risk profile and investments across market capitalisations. Owing to this, you can continue to hold the two funds as long as your portfolio is already diversified. Do remember that the investment horizon of Parag Parikh Flexi cap is much longer.

When investing, always consider your investment horizon, risk, asset allocation in conjunction with your existing portfolio.

Registered readers can post their queries by accessing the Ask Morningstar tab. Our team will answer SELECT queries relating to mutual funds, portfolio planning and personal finance. While we provide broad guidelines, we suggest you consult a financial adviser before making investment decisions.


Articles authored by Kavitha Krishnan

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