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My mutual fund portfolio is offering negative returns. Should I rebalance it?

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

ET Online|
Jun 12, 2019, 12.48 PM IST
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I have 11 mutual funds in my ongoing SIP portfolio:

DSP Natural Resources and New Energy Fund: Rs 3,000 per month
Franklin India Smaller Companies Fund: Rs 5,000 per month
ICICI Prudential Bluechip Fund: Rs 5,000 per month
IDFC Tax Advantage (ELSS) Fund: Rs 1,000 per month
L&T Emerging Businesses Fund: Rs 5,000 per month
L&T Infrastructure Fund: Rs 3,000 per month
L&T Midcap Fund: Rs 1,000 per month
Mirae Asset Emerging Bluechip Fund: Rs 10,000 per month
Motilal Oswal Multicap 35 Fund: Rs 2,000 per month
Reliance Small Cap Fund: Rs 3,000 per month
SBI Magnum Global Fund: Rs 1,000 per month

I have a high risk appetite. Here are some of my short-, medium-, and long-term goals along with expected returns from SIP:

1 year (after that every year): Rs 2 lakh for vacation
1 year (after that every year): Rs 2 lakh for child’s education
2 year: Rs 5 lakh for downpayment for a car
10 year: Rs 10 lakh for child’s higher education
20 year: Rs 20 lakh for child’s marriage
25 year: Rs 5 crore for retirement

I am investing Rs 42,000 every month, but my portfolio has been always negative. Should I rebalance my portfolio? If yes, which funds should I redeem or add?
--Udayan Guha

Gaurav Monga, Director, PxG Consultancy, responds:


It is not advisable to follow a single strategy while investing for both short- and long-term goals. A higher risk appetite doesn’t mean that you should invest only in equities mutual funds. Equity mutual funds are suitable only for longer investment horizon, that is, for five years and above. Equities tend to be more volatile in the short term. You have also highlighted this point by mentioning that your portfolio has always been negative. This can be largely attributed to the short tenure of the portfolio.

Therefore, for your short-term goals, you need to look at like debt as an asset class. Debt mutual funds would be more suitable and lend stability to your portfolio.

Also, you are investing too many equity mutual fund schemes. Ideally, you should have four or five schemes in your portfolio.The equity allocation of your portfolio should have balanced exposure to categories like large cap (25-30%), multi cap (40-45%), mid & small cap ( 25-30%). You should not add thematic/sectoral funds as these funds tend to be cyclical. Diversified equity mutual funds will give you exposure across all sectors.

You can continue with following schemes: ICICI Prudential Bluechip Fund, Mirae Asset Emerging Bluechip Fund, Motilal Oswal Multicap 35 Fund, Reliance Small Cap Fund and L&T Midcap Fund.

For mapping fund/assets against each goal and to know the right asset allocation, you should consult a financial advisor.
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(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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