I’ve 9 funds in my fairness portfolio. Am I over-diversified?

I’m investing ₹1.06 lakh each month in 9 funds, together with ₹55,000 in lively funds and ₹51,000 in passive funds. The lively funds are ICICI Pru Blue Chip ( ₹12,000), HDFC Top 100 ( ₹2,000), HDFC Mid Cap Opportunities ( ₹13,000), DSP Mid Cap ( ₹7,000), Kotak Small Cap ( ₹5,000), and ICICI Pru Multicap ( ₹16,000). The passive funds are ICICI Pru Nifty Index ( ₹14,000), ICICI Pru Nifty Next 50 Index ( ₹17,000), and UTI Nifty Midcap 150 Quality 50 Index ( ₹20,000). My funding horizon is 15-17 years. Am I over-diversified and do I have to make any modifications??

—Name withheld on request

Overall, there’s good diversification throughout a good variety of funds. Given your long-term horizon of 15+ years, your aggressive portfolio that’s all fairness is comprehensible. However, for decreasing volatility and guaranteeing draw back safety, you may introduce a debt element to the portfolio. So, until you may have substantial debt investments exterior of those funds (like mounted deposits or PPF), you may de-risk a bit by including HDFC Corporate Bond Fund for about 15-20% of your portfolio (you may change the multi-cap fund with this).

Also, there’s a excessive allocation to very dangerous funds (similar to mid-, small-, and multi-cap). While current markets haven’t proven it a lot, mid- and small-cap classes are likely to fall extra and can take longer to get better from such corrections. For instance, the Nifty Smallcap 250 is but to get better to its earlier peak whereas the Nifty 50 is hitting new highs. This can be one more reason to exchange the multi-cap fund with a lower-risk debt fund.

Among the large-caps, allocation to HDFC Top 100 may be moved to the Nifty Index Fund since giant cap funds are having a tough time beating index funds and that’s more likely to persist. In phrases of mid-caps, the standard index fund is a brand new one. The historic index knowledge that’s there was again labored, and based mostly on this, the index has delivered higher.

However, from what we now have seen in different issue indices, lots of them have differed on the subject of real-time market efficiency. So, you would wish to regulate the efficiency of this fund.

Strategy-wise, the portfolio is tilted in direction of worth however right now it’s positive. You can look so as to add some growth-style funds afterward if you wish to modify the portfolio.

Srikanth Meenakshi is co-founder at PrimeInvestor

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