Should I spend money on multiple scheme for one class of mutual funds?

I’m 35 and I’m investing in some funds via SIPs. The funds the place SIP is working are ICICI Small Cap, Kotak Small Cap, SBI Small Cap, Nippon Small Cap, HDFC Balanced Advantage Fund, Canara Robeco, and Parag Parekh. I even have some lump sum investments in 2-3 funds which I had made ten years again. Can I proceed in these MFs or ought to I rejig my portfolio?

-Meera Yadav

By Balwant Jain, tax and funding professional

Answer: The one fundamental and vital precept of funding is diversification i.e. asset allocation. The diversification applies not solely throughout numerous asset lessons but in addition must be carried out throughout the similar asset class. This particularly applies to investing in fairness as an asset class. One ought to make investments throughout numerous classes of corporations/mutual fund schemes.

This diversification also needs to be carried out throughout numerous mutual fund homes/sectors. The broad classes for fairness investing are Large Cap, Mid Cap, and Small cap. One ought to spend money on all these classes. The proportion during which one ought to make investments throughout numerous classes and asset lessons would fluctuate relying on the danger profile of the traders.

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You are doing SIP in 4 small-cap schemes out of a complete of seven SIPs, which I believe must be averted. You needn’t spend money on multiple scheme for investing in a single explicit class.

Though you’re simply 35 years previous and presumably have a really lengthy time-frame in your targets, nonetheless I might advise you to keep away from concentrating on one class of the scheme. Since you haven’t talked about the precise quantity of the SIP quantity of all of the schemes, the precise names of schemes for Canara Robeco & Parag Parekh, and the schemes and quantity invested in a lump sum, it’s tough to offer you particular recommendation in your investments, I might advise you to diversify your total investments throughout numerous asset lessons like fairness, debt, and gold.

One most vital recommendation that you should comply with in your investments along with diversification is periodic assessment and rebalancing of your investments. So please assessment your investments periodically and perform the rebalancing throughout asset lessons and numerous broader classes of schemes of mutual funds. You additionally have to assessment the efficiency of all of your schemes at the very least annually and take corrective steps in case any particular scheme underperforms constantly. For investing within the large-cap class you possibly can go for the UTI Nifty Fifty index fund. For investing in Midcap, you possibly can spend money on the HDFC Mid Cap Opportunity Fund, and for small-cap, you possibly can merge all of your SIP within the Nippon Small Cap Fund. As a thumb rule, you possibly can spend money on the ratio of 40%, 30%, and 30% of your fairness allocation within the Large-cap, Mid-cap, and Small-cap classes.

(Views as expressed by the professional.)

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Updated: 26 Sep 2023, 12:32 PM IST