Which MFs must you invest in for a 5-year investment horizon?

My son (36) is currently a resident of US and has been investing in seven mutual fund schemes for the past four years through monthly SIPs. These include 7,500 each in SBI Blue Chip Fund, SBI Focussed Equity Fund, Axis Multicap Fund and Mirae Asset Emerging Bluechip Fund and 5,000 each in ABSL MNC Fund, DSP Small Cap Fund and Franklin India Flexi Cap Fund.

He can invest for another five years, and his objective is wealth creation. Is he on the right path?

–Name withheld on request

Apart from SBI Bluechip, the remaining funds are all on the aggressive side with significant mid-cap or small-cap exposure, resulting in an extremely high-risk portfolio. Even with a high risk-taking capacity, such high exposure to volatile and aggressive funds is avoidable. That apart, a few funds have also turned underperformers. You can restructure the SIPs as follows: continue with SBI Bluechip and Mirae Asset Emerging Bluechip with the same SIPs. Start a new SIP of 12,000 in SBI Nifty Index Fund, which will moderate the overall portfolio risk. Going for passive funds in the large-cap space is increasingly becoming the better option.

Reduce SIPs in SBI Focused Equity and Axis Multicap to 5,000 each to reduce the overall risk. But note that Axis Multicap is a very new fund with no established track record; the limited return history that the fund has offers no clear picture. Keep an eye on the fund performance and take corrective steps if needed. Start a new SIP of 8,000 in Nippon India Small Cap. DSP Small Cap has not been a good category…

Read complete post here:
Source link