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Mutual Fund Corner. Q: 45-year-old Naren Khemani writes us from Mumbai. I'm a seasoned investor who has been investing in capital markets for over a decade now. I have identified myself as an aggressive risk investor. I have seen the volatility of the stock market and can stomach it without any concerns. 1) During June 2017, I have invested a lump sum amount in four mutual funds. Following is the breakdown of these investments. This is a one-time lump sum investment. I plan to keep these amounts invested for the next 12 years. a) Kotak Standard Multi-Cap Fund-Direct Growth: Rs 7.5 lakh. b) SBI Blue Chip Fund-Direct Growth: Rs 7.5 lakh. c) ABSL Frontline Equity Fund-Direct Growth: Rs 7.5 lakh. d) HDFC Balanced Advantage Fund-Direct Growth: Rs 6.5 lakh. 2) I am planning to start my new SIP investment of Rs 2 lakh per month in following five mutual funds. I have chosen these funds by my own research. I'll be investing Rs 40,000 (20 percent of Rs 2 lakh) in each fund via monthly Systematic Investment Plan (SIP). I'm an aggressive risk investor and this SIP will continue for a 12-year duration. I have chosen these funds by reviewing their low expenses, the stocks they hold and stock overlap in the portfolio. I haven't chosen a large-cap fund for SIP since I am of a belief that over a long period active mutual funds may not be able to beat the passive index fund. To add beta, I have chosen (UTI Nifty Next 50 Fund) over the Nifty Index Fund. I have chosen five funds for SIP since it would be easy to track and reduce the clutter in the portfolio. a) UTI Nifty Next 50 Index Fund - Direct Growth (Have chosen UTI over ICICI Nifty Next 50 Index Fund due to low TER). b) Mirae Asset India Equity Fund-Direct Growth (Multicap ). c) L&T Midcap Fund-Direct Growth (Midcap). d) Kotak Emerging Equity Fund-Direct Growth (Midcap). e) HDFC Small Cap Fund-Direct Growth. Could you kindly review my overall mutual fund portfolio and fund selection? Given the monthly investment of Rs 2 lakh, would you recommend me to add more funds or is this portfolio okay? I have chosen the Kotak Emerging Equity Fund since it has mid/small-cap allocation. 3) I have adequate health insurance cover/emergency funds/bank fixed deposits worth Rs 50 lakh. 4) I also invested in Public Provident Fund (PPF) to get a yearly tax benefit. 5) From the equity allocation in mutual funds, my goal is to generate a corpus of Rs 10 crore in 12 years duration for my two children's higher education in India and US and remaining leftover funds will be used for my retirement purposes.
A: 1) Lump Sum Investment
You can continue to invest in Kotak Standard Multi-Cap Fund. However, we would suggest you redeem your investments from SBI BlueChip Fund, ABSL Frontline Equity Fund and HDFC Balanced Advantage Fund. SBI BlueChip Fund and ABSL Frontline Equity Fund have been underperforming its peers in the last three year and five-year time frame.
We would suggest you invest in another large-cap fund: Reliance Large Cap Fund and Canara Robeco Emerging Equities Fund. HDFC Balanced Advantage Fund is a balanced fund with investments in both equity and debt. Asset allocation needs to be done at the portfolio level and not scheme level. Also, our back-testing shows that investments in equity and debt funds separately have given 2-2.5 percent higher return on an average as compared to a debt fund. We suggest you invest in Mirae Asset India Equity Fund and Reliance Credit Risk Fund.
2) SIP: All Fund Selection Is Good Except One
You can continue to invest in Mirae Asset India Equity Fund, L&T Mid-cap Fund, Kotak Emerging Equities Fund and HDFC Small Cap Fund. UTI Nifty Index Fund is an index fund. We do not recommend our investors to invest in index funds as these funds mirror the index and do not have the potential to generate returns over and above their index. It is better to invest in an open-ended diversified equity fund. You can invest in Reliance Large Cap Fund.
You can continue with your insurance, fixed deposits and PPF.
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