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Q: 36-year-old Kannan Ambady writes to us from Kerala. I am currently doing SIP in following funds. Mirrae Asset Emerging Bluechip Fund Direct (G): Rs 8,000 Reliance Small Cap (G): Rs 4,000 Reliance Focused Equity Fund (G): Rs 4,000 Kindly advise whether my SIP choice are good. I am also investing in recurring deposit (Rs 8,000 monthly), post office (Rs 10,000 monthly) and National Pension System (Rs 2,000). My target is Rs 80 lakh-Rs 1 crore in another 15-16 years.
A: Let's take your target as Rs 1 crore in 15 years. For that, you have increase your SIP amount in mutual funds from the current Rs 16,000 to Rs 20, 000 per month. This should help you achieve your target considering an annual return of 12 percent. As far as your mutual fund portfolio is concerned, there is a need to rejig that.
Your portfolio is missing the basic category of mutual funds, which should form a part of any investor’s portfolio. Therefore, you should add large cap and mid-cap funds to your portfolio. The allocation can be 60 percent large cap and 40 percent mid and small cap.
You should also consider diverting the SIPs from Reliance Small Cap and Reliance Focused Equity Fund to some other funds, which are more apt for your portfolio. Both the funds have witnessed a change in manager and they don’t have a long-term track record under the new manager.
In place of Reliance Small Cap, you can consider investing in:
Group/Investment Morningstar Analyst Rating Morningstar Rating Overall Returns (%) 1-Yr 3-Yr 5-Yr DSP Small Cap Reg Gr Silver ÙÙÙÙ -18.82 7.33 26.72 Franklin India Smaller Companies Gr Silver ÙÙÙÙ -14.26 8.79 23.57 HDFC Small Cap Gr Bronze ÙÙÙÙ 0.42 16.66 20.74
As far as focused funds are concerned, they are relatively aggressively run fund. Given the mandate is to invest maximum in 30 stocks, these funds have a concentrated portfolio and hence they offer a high-risk investment proposition. Therefore, you need to have a requisite risk-appetite for investing in them. If that’s not the case, then you should invest in a traditional diversified equity fund.
With regards to your investments in recurring deposit, I think you will be better of replacing them with fixed deposit. They also offer assured returns and will offer you better returns. Your investments in post office and NPS may continue.
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