I used to invest Rs 41,000 every month in mutual funds through a Systematic Investment Plan (SIP). Due to the present market turmoil and my inability to stay invested, I would be reducing my investments by half. Can you please advise me in which funds I should remain invested? Can you also suggest a model portfolio?
We have looked at your portfolio and came up with suggestions on how you can tweak it to make it work better.
Looking at the current state of the market, our advice would be not to offload your holdings at this point in time. You will lose heavily if you do. Investors with a long-term objective should not pull out of the market simply because of the fall.
Number of funds
You have 12 funds at present. You do not need that many. A good portfolio need not be overly diversified. If you have to sell, though we do not suggest it in such a market, you can consider getting rid of Morgan Stanley A.C.E Fund, Reliance Diversified Power Sector Fund, DSPBR World Gold Fund, Reliance Vision, Magnum Global Fund, Sundaram BNP Paribas CAPEX Fund and Kotak Opportunities Fund.
Opting for a SIP
It is wise that you are continuing with your SIP. But, if you are halving your monthly investment from Rs 41,000 to Rs 20,000, then we suggest that you stick to about 4 or 5 funds.
Market cap exposure
Your portfolio is currently concentrated on mid-and small-caps. We suggest that you increase your large-cap exposure. You can raise your allocation to funds like DSPBR Top 100 and HDFC Top 200.
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Asset allocation
Your debt exposure is negligible. You must have a debt fund in your portfolio. This will help in curtailing the downturn in the equity market. Kotak Flexi Debt can be a good choice.Sector bias
Your portfolio is driven by thematic/sector funds, which constitute 47 per cent of your fund holdings. The highest allocation (12.71 per cent) is in Reliance Diversified Power Sector. There are three funds with a focus on the infrastructure theme--Tata Infrastructure, DSPBR T.I.G.E.R and Sundaram BNP Paribas Capex Opportunities. One should not have a high allocation to sector or thematic funds.
As far as infrastructure funds are concerned, we suggest you stick to just one: Tata Infrastructure or DSPBR T.I.G.E.R.
Type of funds
You do have a good quality portfolio since 8 of your funds (out of 12) are either 5-or 4-star rated. That said, you do not need that many funds in your portfolio.
New funds
Avoid new funds. For instance, you have purchased Morgan Stanley A.C.E Fund. On top of that, your portfolio also has a fund, DSPBR World Gold Fund, that invests in stocks of international gold mining companies. In case you want to take exposure to gold, consider a gold exchange traded fund.
| EXISTING PORTFOLIO | |||
| Funds | Allocation (%) | Funds | Allocation (%) |
| Style Break-Up | |
| Rank | Allocation (%) |
| Large-Cap | 50.87 |
| Mid-Cap | 24.75 |
| Small-Cap | 5.87 |
| Not Classified | 18.51 |
| Sector Allocation | |
| Sector | Allocation (%) |
| Financial | 26.55 |
| Energy | 17.03 |
| Engineering | 9.38 |
| Diversified | 6.22 |
Monthly Investment
Since you are planning to cut your monthly investment amount by half, we have picked a total of five funds. Three funds are from your existing portfolio. We also suggest DSPBR Top 100 for a long-term. This fund has been a consistent performer. And we have added Kotak Flexi debt fund to give stability to your overall portfolio.
Following are the funds we recommend for your monthly SIPs:
Rebalance
Invest systematically and rebalance your portfolio once a year to ensure your equity: debt allocation is intact.