Over the past six months, I have been investing ₹3,000 per month each in ICICI Pru Multi-Asset, Tata Small Cap, Axis Bluechip, Kotak Standard Multicap, Mirae Asset Focused and IDFC Sterling Value funds. Please review my portfolio and advise whether I can raise my investment by around ₹5,000 per month in any of the existing funds or go for a new fund. My risk appetite is medium to high with a time horizon of 5-7 years.
VS Kulkarni
You have a well-diversified portfolio in your SIP kitty, as each scheme belongs to a different equity MF category. Your portfolio, though, requires some re-jiging.
A back-of-the-envelope calculation on the composition of your investment in these six schemes shows that around 86 per cent of your current investments are in equities, 2 per cent in gold and the remaining 12 per cent is spread among debt instruments such as government securities and debentures.
Of the equity allocation, around 48 per cent, 16 per cent and 22 per cent of assets are in large-, mid- and small-cap stocks, respectively (based on AMFI’s MCAP classification).
Further, your investment has been spread across 209 stocks. The top holdings are: ICICI Bank (5.3 per cent), HDFC Bank (3.8 per cent), Infosys (2.6 per cent), RIL (2.5 per cent) and Bajaj Finance (2.1 per cent).
At the sector level, a higher allocation has been made in banking (17 per cent), followed by finance (8 per cent) and consumer non-durables (7 per cent).
Three of the schemes you invest in — Kotak Standard Multicap, Mirae Asset Focused and IDFC Sterling Value — follow the multi-cap approach of picking stocks across market capitalisation.
However, each scheme follows a different investment strategy.
Kotak Standard Multicap follows the strategy of selecting better-performing sectors and then picking stocks within these sectors. Its performance — as measured by three-year rolling returns calculated from the last seven years’ NAV history — shows that the scheme delivered a compounded annualised return of 17 per cent, while the category delivered 14 per cent. The scheme has been rated five-star by BusinessLine Portfolio Star Track MF Rating .
Funds that are rated five-star and four-star are considered good to invest in. You can continue to hold the scheme and increase the monthly SIP amount to ₹5,000.
IDFC Sterling Equity, which was part of the small- and mid-cap fund category earlier, has now been positioned as a value fund. Its performance has been below-average over the period. It has been rated two-star by BL Star Track MF Rating. As a category, too, value funds have not put up a good show in the past few years. You can stop your SIP in this scheme while holding the units.
Mirae Asset Focused is a recently launched one, investing in a maximum of 30 stocks.
It is unfair to judge its performance given its very short track record.
But considering that most of the equity funds managed by Mirae Asset MF have been consistent performers across periods, you can continue the SIPs in this fund.
Tata Small Cap, too, has a short NAV history, since November 2018. You can continue the SIP in this scheme and review the performance after 12 months.
Axis Bluechip belongs to the large-cap category and has delivered category-beating returns over the long run. The performance — as measured by three-year rolling returns calculated from the last seven years’ NAV history — shows that the scheme delivered a compounded annualised return of 14 per cent, while the category delivered 12.6 per cent. The scheme has been rated five-star by BL Star Track MF Rating . You can continue to hold the scheme and increase the monthly SIP amount to ₹4,000.
ICICI Pru Multi-Asset belongs to the newly introduced multi-asset allocation category, investing at least 10 per cent each in equity, debt and gold. Earlier, it was known as ICICI Pru Dynamic before its mandate got changed in May 2018. This asset allocation strategy aims to reduce the volatility of the returns by investing in asset classes that are negatively correlated.
Over the past year, the fund has delivered a decent return of 11 per cent. You can continue the SIPs in this scheme and review the performance after a year.
Considering your risk profile, your allocation to mid-caps may not be sufficient.
You can start a monthly SIP of ₹5,000 in DSP Midcap, one of the top-performing funds in the mid-cap category. It has been rated four-star by BL Star Track MF Rating .
Send your queries to mf@thehindu.co.in