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Mutual Fund Corner: 'I have invested Rs 20,000 per month in mutual funds by SIP, what should I do?'

Mutual Fund Corner: 'I have invested Rs 20,000 per month in mutual funds by SIP, what should I do?'

Mutual Fund Corner: 'I have invested Rs 20,000 per month in mutual funds by SIP, what should I do?'
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By CNBC-TV18 Nov 15, 2018 6:46:21 PM IST (Updated)

Want to invest in mutual funds but don’t know how to go about it? Get all your mutual fund related queries answered by our expert, Manoj Nagpal, managing director and chief executive officer, Outlook Asia Capital, on our show Mutual Fund Corner.

Want to invest in mutual funds but don’t know how to go about it?

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Get all your mutual fund related queries answered by our expert, Manoj Nagpal, managing director and chief executive officer, Outlook Asia Capital, on our show Mutual Fund Corner.

Q: I am a long term investor and currently investing in SIP DSP Midcap, DSP Tiger, Invesco India Growth Opportunities, ICICI Bluechip, Motilal 35, Parag Parikh, Reliance Small Cap, SBI Small Cap, SBI Consumption and Tata Digital India. Roughly I invested around Rs 20,000 a month and I hold HDFC Equity Savings, L&T Emerging Businesses, Mirae Emerging Bluechip and two new fund offers. I would like your advise if I should change, asks Karan Ravi.
A: You have almost 15 funds in your portfolio spread across the market capitalisation curve, sectoral orientation and some geographic diversification through Parag Parikh Long Term Equity. And a bit of debt also through HDFC Equity Savings Fund. Such a portfolio construction is a bit of a case of over-diversification.
You would be holding around 300-320 unique underlying stocks in the underlying portfolio. This doesn’t add value to the wealth creation process. Actually, you may just be diminishing value with such a large basket of funds.
I don’t think, ideally there should be more 4-5 mutual funds in a portfolio. So four steps I would recommend to you to consider:
  1. Consolidate the mutual funds to 4-5 funds.
  2. Use two multicap or large cap funds. For example: You can continue with the ICICI BlueChip and Parag Parikh Fund. It depends on your risk profile too, but these two could serve your purpose.
  3. On the midcap front, continue with DSP MidCap and Reliance Small Cap.
  4. Lastly, if you want to keep a thematic fund, just keep one theme either the infra or the consumption theme.
  5. These four steps will help you run a more effective portfolio.
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