Can I stop investing in ICICI Prudential Bluechip Fund?
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ICICI Prudential Bluechip Fund: Rs 5,000
Nippon India Large Cap Fund: Rs 2,500
Mirae Asset Large Cap Fund: Rs 3,000
Axis Midcap Fund: Rs 1,500
HDFC Small Cap Fund: Rs 1,500
SBI Small Cap Fund: Rs 5,000
Axis Long Term Equity Fund (ELSS): Rs 3,000
Mirae Asset Emerging Bluechip Fund: Rs 3,000
Recently, I discovered that the stocks in ICICI, Reliance (now Nippon) and Mirae large cap funds from my portfolio are overlapping. I had not paid any attention to this factor earlier when I started the investments. I am thinking of discontinuing ICICI Prudential Bluechip Fund. Please advise if that is the right thing to do.
Also, looking at my portfolio, do you suggest any other changes to meet my goals.
You are right about duplication of mutual fund portfolios. If you have several schemes in the same category, it can happen. Large cap mutual funds’ investment universe of top 100 stocks by market capitalisation makes them prone to portfolio duplication. That's why many mutual fund advisors ask investors to stick to one or two schemes in every mutual fund category. They also ask investors to limit the total number of schemes in their mutual fund portfolio to four or five. This also includes tax saving mutual fund schemes. Apart from overdiversification and duplication of portfolios, too many schemes would also make it difficult to track the performance of the portfolio.
All your large cap mutual funds are good performers. So, there is not much of choice when it comes to cutting down the number of schemes in your portfolio.
Your mutual fund portfolio lacks focus. A moderate to aggressive portfolio should invest mostly in multi cap schemes and mid cap schemes. The proportion of mid cap schemes should be based on the extra risk the investor is willing to take for the extra returns. You should ideally choose one or two multi cap schemes and mid cap schemes.
If you find the task a bit daunting, you may consult a mutual fund advisor.