HDFC Balanced Advantage Fund: Rs 1,000
Axis Bluechip Fund: Rs 3,000
Mirae Asset Emerging Bluechip Fund: Rs 1,500
Axis Long Term Equity Fund: Rs 2,500
DSP Tax Saver Fund: Rs 1,500
Motilal Oswal Long Term Equity: Rs 2,000
Mirae Asset Tax Saver: Rs 13,500 (lumpsum)
HDFC Hybrid Equity Fund: Rs 500
ICICI Prudential Equity & Debt Fund: Rs 1,000
SBI Equity Hybrid Fund: Rs 25,000 (lumpsum)
ICICI Prudential Banking & Financial Services Fund: Rs 1,500
Nippon Power & Infra Fund: Rs 10,000 (lumpsum)
I know I have an over diversified mutual funds portfolio. How can I downsize this portfolio which will strike a perfect balance between maximising returns, mitigating risks and fees, and keeping in mind a time horizon of 5-15 years? What factors should I consider to build an optimal mutual fund portfolio with a maximum of 4-5 funds?
- Shakabda Sarangi
If you sharply define your goals, horizon, and risk profile, you will be able to have a focused portfolio. That is the reason why we ask investors to define risk profile a little more clearly. Many times when we say conservative to moderate or moderate to high, we have certain things in mind which may change according to the market conditions. That can be very dangerous to your investment strategy. It is even more dangerous when you ask for opinion about your portfolio because the other person might interpret these terms in his or her own way.
A moderate equity investor is asked to mostly invest in multi cap mutual funds. If you want to reduce risk, you may also add large cap mutual funds to you portfolio.
We do not recommend sector schemes to regular investors. We believe they are better off in a diversified multi cap scheme that would have a meaningful exposure to sectors with bright prospects. You also should revisit your decision to invest in a large & mid cap scheme, as it is not in line with your risk profile. These schemes must invest at least 35% in mid cap schemes, and that make them risky for moderate investors.
You should also try to assign a goal to your mutual funds. You can link your long-term goals to your ELSS investments. Most ELSS follow a multi cap strategy. So treat them as multi cap schemes.
You can link your medium term goals to your investments in aggressive hybrid schemes, balanced advantage schemes, and large cap schemes. This is mainly because these schemes are suitable for a medium-term investment horizon of five to seven years.
Keep track of the performance of these schemes. If any scheme underperforms its benchmark or category for a year or more, you can sell the scheme and put the money in a multi cap scheme. Keep in mind that you do not need more than two to three schemes to take care of your medium-term and long-term goals. You have not mentioned when you have started investing in these schemes. If the investments are made recently, they would be in losses. Selling them at this point would be booking losses. That is why we are not asking you to sell any schemes immediately to cut down on the number of schemes.
Finally, try to quantify your goals. Try to find out the current cost of the goal and provide for annual inflation to reach a realistic target. This will help you to find out how much you need to invest to build the target corpus.
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