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Am I allocating money to the right mutual funds?

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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Last Updated: Jan 16, 2020, 04.53 PM IST
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I am 24 years old. I have just started investing in mutual funds after doing a lot of research and seeing the past five to 10 years' performance of some schemes.

I have decided that I should invest in all categories: equity, balanced and debt. I will invest in small cap, large & mid cap, multi cap, and large cap.

Let us say, I want to invest Rs 2,000 in a small cap fund. Instead of putting Rs 2,000 in one small cap fund, I would divide this among the top three small cap funds. I have the same strategy for multi cap, large & mid cap, balanced, as well as debt funds.

Currently, I am not investing much but I will increase my investments gradually. Is this strategy correct? My risk profile is moderately high.

I have selected the following mutual funds from different category

Small cap: SBI Small Cap Fund, Nippon India Small Cap Fund, HDFC Small Cap Fund

Large & Mid Cap: Mirae Asset Emerging Bluechip Fund, Canara Robeco Emerging Equities Fund, Invesco India Growth Opportunities Fund

Multi Cap: Kotak Standard Multicap Fund, Motilal Oswal Multicap 35 Fund, SBI Magnum Multicap Fund

Balanced: ICICI Prudential Equity & Debt Fund (Aggressive), SBI Equity Hybrid Fund (Aggressive), Mirae Asset Hybrid Equity Fund (Aggressive), ICICI Prudential Multi Asset Fund (Multi Asset allocation)

Debt: Nippon India Income Fund (medium to long term), IDFC Bond Fund (medium to long term), Nippon India Gilt Securities Fund (Gilt)

--Ashish Kumar Jha

Gaurav Monga, Director, PxG Consultants, responds:


First, identify your short- and long-term goals and accordingly allocate the investable surplus to respective asset classes. That is, equity and debt. For the long term, equity-oriented funds are suitable, and for the short term, debt-oriented funds should be selected.

The second step will be scheme selection. Ideal number of equity schemes in a portfolio should be between four to five. Investing in a lot of schemes will lead to over diversification and will not yield more returns. At the initial stage of portfolio construction, what is more important is to diversify between different categories of equity funds like- large, multi, mid and small cap funds. Don’t add multiple schemes from the same category. The following allocation can be maintained between different equity categories - large (25-30%), multi (30-35%), large & mid (15-20%), mid and Small (15-20%).

The schemes selected by you are good. You can choose from these schemes. But you need to cut some out.

Similarly, you can add two to three different debt funds, depending on your investment horizon. But do ensure that the duration of the debt funds selected by you matches your investment horizon. For example, you have mentioned about investing in gilt funds. This category requires a long-term duration of more than five years.

So, you need to be careful while selecting funds. Another important aspect of selecting a debt fund is looking at the credit quality of the portfolio it maintains. For more specific details on the debt fund, you should take the help of a mutual fund advisor.


(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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