Long-term mutual fund investors must review portfolio every year

Long-term mutual fund investors must review portfolio every year

Photo: iStock

Photo: iStock

I am 30 years old and I invest ₹2,500 each in SIPs of Canara Robeco Emerging Equities fund, L&T Emerging Businesses Fund Growth, Reliance Small Cap Fund Growth Plan and IDFC Focused Equity Fund Regular Plan Growth for my retirement. I want to invest in funds which I can continue for the next 25 years without switching. Are these funds good?

—Ankush Gandhi

You are presently investing a total of ₹10,000 a month and practically all of it is going towards the mid-cap and small-cap segments of the equity market. Except for IDFC fund which has about half its portfolio in large-cap stocks, all other funds’ portfolios are oriented towards high-risk sections of the market. As a young person with a long-term outlook, it is true that you can afford to take risk with your investments, but you should realise that a well-diversified portfolio is what would position you best for optimum long-term growth. So, my first recommendation would be to consider a portfolio that is asset allocated between equity and debt as also one that invests in a handful of different types of equity funds so that it is well-diversified and balanced. For your retirement portfolio, I would suggest a 40% allocation to a large-cap fund, a 20% allocation to a diversified fund, another 20% to a mid- and small-cap fund, and the remaining 20% in a short-term debt fund. Aditya Birla Sunlife Frontline Equity fund, Franklin India Equity fund, HDFC Mid-cap Opportunities Fund, and ICICI Prudential Short Term Fund would be a good way to get started.

However, this portfolio cannot remain static and unchanging for the next 25 years. As you see, the fund houses of these funds are highly reputable. Even so, it is very likely that one or more of these funds would change hands in terms of fund management or its management principles, and thus might not continue to be suitable for your portfolio. In such situations, it is imperative that you move on and shift your investments to a different fund. To do this, an annual portfolio review is a must-do activity for every long-term investor.

I am a British medical practitioner and have been living in India for 3 years. Can I invest in mutual funds via SIPs? Can you suggest a few schemes for 5-6 years as I would settle back in the UK after that? I can invest up to ₹80,000 every month.

—Jacob Clark

If you happen to be a person of Indian origin and possess an OCI (Overseas Citizen of India) card (either through lineage or marriage), then the answer is simple—yes, you can invest in mutual funds in India through SIP or lumpsum. On the other hand, if you do not possess a PIO (Person of Indian Origin) or OCI card, then the answer is much less certain. I enquired around with mutual fund companies, and the answer I got was that it would depend on the type of bank account you are holding in India. Again, if you have a savings bank account (as a resident), or an NR bank account (non-resident external, NRE, or non-resident ordinary, NRO), they would have no issues accepting your investment. I hope you fall into one of these situations and can avail yourself of the investment opportunities that the Indian mutual fund market provides. I would advice that you enquire with specific mutual fund companies before going ahead with your investment application.

Regarding actual investment themselves, for a timeframe of 5 years, you should go for an asset allocated portfolio with about 60% in equity funds and the rest in debt funds. A large-cap fund and a couple of diversified funds in the equity category, along with a short-term fund and an ultra-short-term fund in the debt category would constitute a good portfolio for you. You can invest ₹16,000 in each of these five funds every month and let it run for the duration of your stay in India.

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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com. Queries and views at mintmoney@livemint.com

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