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Should I surrender my Kotak Emerging Equity, Kotak Small Cap, Canara Robeco Blue Chip, Axis Bluechip, and HDFC Top 100 Funds?

Ramalingam

Ramalingam Kalirajan  |7952 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 17, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Chandrakant Question by Chandrakant on Sep 15, 2024Hindi
Money

Scheme Name KOTAK EMERGING EQUITY FUND KOTAK SMALL CAP FUND - REGULAR PLAN Canara Robeco Blue Chip Equity Fund Axis Bluechip Fund -Regular Plan - Growth HDFC Top 100 Fund - Regular Plan - Growth PLEASE ADVISE IF i neep to keep ur surrender

Ans: It seems you are invested in various mutual funds, including small-cap and large-cap funds. You’ve mentioned specific schemes, but let’s focus on evaluating the categories of funds you're invested in and whether you should consider any changes or realignments.

Small-Cap Funds
Small-cap funds generally invest in companies with smaller market capitalization. These funds offer high growth potential but come with higher risk. Small-cap stocks are often volatile and sensitive to market fluctuations. They can outperform over the long term but may see short-term corrections.

Advantages: Higher growth potential over long periods. Suitable for those with a high risk appetite.

Disadvantages: Higher volatility. If your risk appetite is low or your investment horizon is shorter, you may want to reduce exposure to small-cap funds.

Since your portfolio has both small-cap and large-cap funds, ensure you’re not overly exposed to small-cap stocks. It's essential to maintain a balanced allocation.

Large-Cap Funds
Large-cap funds invest in companies with a large market capitalization. These companies are well-established and tend to be more stable. They don’t offer the explosive growth of small-cap funds, but they provide more stability during market downturns.

Advantages: Lower risk, stable growth, and ability to withstand market fluctuations. Suitable for risk-averse investors or as a base for a balanced portfolio.

Disadvantages: Lower growth potential compared to small-cap or mid-cap funds.

Large-cap funds can be an excellent part of your long-term strategy, especially if you’re looking for stability and want to ensure steady growth.

Active vs. Index Funds
You didn’t specifically mention index funds, but since you're invested in large and small-cap funds, it's essential to highlight why actively managed funds are often preferable.

Actively Managed Funds: These allow professional fund managers to make decisions about which stocks to buy and sell. They aim to outperform the benchmark, offering better returns over time.

Disadvantages of Index Funds: Index funds, on the other hand, simply replicate the benchmark index, offering average market returns. They don’t have the flexibility to adapt to market changes and often miss out on opportunities to outperform.

Your focus on actively managed large-cap and small-cap funds indicates that you're on the right path. These funds can provide better returns than index funds over the long term.

Regular Funds vs. Direct Funds
It's important to mention the distinction between direct funds and regular funds. If you are currently investing in direct funds, you might want to reconsider your approach.

Disadvantages of Direct Funds: Direct funds have lower expense ratios, but they lack the professional guidance that a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD) can offer. Many investors in direct funds miss out on timely rebalancing and portfolio adjustments.

Benefits of Regular Funds: Regular funds, invested through an MFD with CFP credentials, offer professional advice. Your portfolio is monitored and adjusted according to market conditions, which helps optimize returns.

Regular funds are particularly beneficial for those who do not have the time or expertise to manage their investments actively.

Strategic Adjustments to Your Portfolio
Now that we’ve evaluated the categories of funds you’re invested in, let’s explore some adjustments that can enhance your portfolio's performance.

Balanced Allocation: Aim for a balanced allocation between equity and debt. Since you already have exposure to both large-cap and small-cap funds, assess if the current proportion suits your risk appetite. A higher allocation to large-cap funds will provide stability, while small-cap funds will offer growth.

SIP Strategy: Continue with a disciplined SIP strategy in these funds. SIPs will help in averaging out the purchase cost, especially in volatile markets. You could also consider increasing your SIP contributions over time as your income grows.

Equity vs. Debt Ratio: Given your current age, if your time horizon for investment is long (7-10 years), it may be wise to maintain a higher equity-to-debt ratio, around 70:30. As you approach your financial goals, you can gradually shift to more debt instruments for safety.

Final Insights
Based on the funds you’ve mentioned, you’re on the right track with your mutual fund investments. Both large-cap and small-cap funds offer good growth potential over the long term, with the right balance of stability and risk.

Maintain a balanced portfolio with a healthy mix of equity and debt investments.

Continue investing through SIPs to manage market volatility.

Avoid direct funds if you lack professional guidance. Instead, invest through regular funds via an MFD with CFP credentials for better monitoring and adjustments.

Keep a close watch on the performance of your funds. Regular portfolio reviews will help you stay on course for your financial goals.

Finally, ensure your life and health insurance coverage is adequate to protect your family’s future.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Head, Rank MF - Answered on Dec 20, 2019

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I have invested the following mutual funds in the year 2015. Would like to have your opinion whether I can still continue in the scheme or shift to some other scheme? Also would like to know the reason for the same.  Name of the Fund Category RankMF Star Rating Aditya Birla Sun Life Focused Equity Fund (G) (29) Equity - Focused Fund 4 Aditya Birla Sun Life Pure Value Fund (G) Equity - Value Fund 2 DSP Natural Resources and New Energy Fund - Regular Plan (G) (29) Equity - Sectoral Fund - Energy & Power 4 DSP Small Cap Fund - Regular Plan (G) Equity - Small cap Fund 2 HDFC Mid-Cap Opportunities Fund (G) (56) Equity - Midcap Fund 3 IDFC Multi Cap Fund - Regular Plan (G) (26) Equity - Multi Cap Fund 4 Invesco India Multicap Fund (G) (26) Equity - Multi Cap Fund 3 L&T Emerging Businesses Fund - Regular Plan (G) (19) Equity - Small cap Fund 2 L&T India Hybrid Equity Fund (G) Hybrid - Aggressive Hybrid Funds: 5 L&T India Value Fund (G) (28) Equity - Value Fund 3 SBI Blue Chip Fund (G) (30) Equity - Large Cap Fund 3 SBI Magnum Multicap Fund - Regular Plan (G) Equity - Multi Cap Fund 4 Sundaram Equity Fund - Regular Plan (G) Equity - Multi Cap Fund 4 Sundaram Midcap Fund - Regular Plan (G) Equity - Midcap Fund 3 Sundaram Rural and Consumption Fund (G) Equity - Thematic Fund - Other 4 Sundaram Services Fund - Regular Plan (G) Equity - Sectoral Fund - Service Industry 4 Sundaram Small Cap Fund - Regular Plan (G) (29) Equity - Small cap Fund 2 Sundaram Value Fund - Series VII - Regular Plan (G) Close ended -
Ans: You may continue with 4 & 5-Star rated ones and rest can be relooked. 

Multicaps: Suitable options considering quality and value for money are:

  • Motilal Oswal multicap 35
  • Axis Mutlicap
  • Parag Parikh Long Term Equity Fund 

ELSS: Motilal Oswal Long Term Equity Fund 

Focused: 

  • Axis Focused 25
  • DSP Focused Fund

Midcaps: Suitable options considering quality and value for money are:

  • Motilal Oswal Midcap 30
  • DSP Midcap
  • Kotak Emerging Equity Fund

Small Caps:

  • Kotak Small Cap
  • Axis Small Cap

Equity Value Funds:

  • Tata Equity PE Fund
  • UTI Value Opportunity Funds

Large Caps: 

  • LIC MF Large Cap Fund - Growth
  • Mirae Asset Large Cap Fund - Growth 

Large and Midcaps: 

  • Axis Growth Opportunities Fund – Growth
  • Tata Large And Midcap Fund - Growth 

Aggressive Hybrid Funds: 

  • Mahindra Hybrid Equity Nivesh Yojana – Growth
  • Axis Equity Hybrid Fund - Growth 

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Ramalingam

Ramalingam Kalirajan  |7952 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 25, 2024

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Dear sir I have invested in 21 different mutual funds scheme . In few through SIP and others in lump sum. The schemes are- (1) Adity Birla Sunlife Digital India (2) Adity Birla Sunlife Flexicap Fund (3) Axis ELSS Tax Saver Fund (4) Canara Robeco Bluechip Equity fund (5) HDFC Tax Saver -Regular Plan (6) ICICI Prudential Bluechip Fund (7) ICICI Prudential Commodities Fund (8) ICICI Prudential Long Term Equity - Tax Saving Fund (9) IDFC Dynamic Equity Fund (10) IDFC Sterling Value Fund (11) Kotal Emerging Equity Scheme (12) Kotak Multicap Fund (13) Kotak Small Cap Fund (14) Mirae Asset ELSS Tax Saver Fund (15) Nippon India Balanced Advantage Fund (16) Nippon India Tax Saver – ELSS Fund (17)Nippon India Value Fund (18) Parag Parikh Flexicap Fund (19) PGIM India Flexicap fund (20) PGIM India Midcap Opportunities Fund (21) Sundram Select Midcap- Regular Plan . I want to reduce number of schemes in my portfolio. Kindly suggest me 5-6 good schemes where I can switch . Thanks
Ans: Firstly, congratulations on diversifying your investments across various mutual funds. You’ve made a commendable effort to invest systematically, both through SIPs and lump sum. Your commitment to securing your financial future is truly impressive.

However, managing 21 different mutual funds can be overwhelming and counterproductive. It may lead to over-diversification, reducing the impact of potential gains and increasing complexity. Let’s explore how you can consolidate your portfolio into 5-6 high-quality schemes while maintaining a balanced and effective investment strategy.

Assessing Your Investment Objectives
Before streamlining your portfolio, let’s understand your investment goals. These goals could include:

Long-Term Growth:

Building wealth over a long period, focusing on high-growth potential.
Tax Saving:

Reducing tax liability while investing, typically through ELSS funds.
Balanced Approach:

Combining stability and growth through a mix of equity and debt.
Sectoral Exposure:

Investing in specific sectors to leverage industry-specific growth.
Capital Preservation:

Minimizing risk and preserving capital while generating modest returns.
Each of your existing funds might align with one or more of these objectives. It’s essential to retain funds that best fit your primary goals.

Understanding Over-Diversification
Having too many funds can dilute the benefits of diversification. Here’s why over-diversification may not be beneficial:

Redundancy:

Multiple funds may hold similar stocks, leading to overlapping portfolios and reduced diversification benefits.
Complex Management:

Tracking and managing numerous funds is time-consuming and can complicate performance evaluation.
Diminished Returns:

Spreading investments too thin can lead to average performance, as high-performing funds’ impact gets diluted.
To avoid these issues, it’s wise to focus on a select few, well-performing funds that align with your investment strategy.

Categorizing Your Existing Funds
Let’s categorize your 21 funds based on their types and focus areas. This will help in identifying redundancy and areas to consolidate.

Equity Funds:

Focus on growth through investments in stocks.
Debt and Balanced Funds:

Aim for stability and regular income by investing in a mix of equity and debt.
Tax-Saving Funds (ELSS):

Provide tax benefits under Section 80C along with growth potential.
Sectoral and Thematic Funds:

Invest in specific sectors or themes to leverage industry growth.
Identifying Redundant Funds
By comparing funds within each category, we can pinpoint overlapping investments. Here’s how we categorize your existing funds:

Equity Funds:

Aditya Birla Sun Life Flexicap Fund, Canara Robeco Bluechip Equity Fund, ICICI Prudential Bluechip Fund, IDFC Sterling Value Fund, Kotak Multicap Fund, Kotak Small Cap Fund, Parag Parikh Flexicap Fund, PGIM India Flexicap Fund, PGIM India Midcap Opportunities Fund, Sundaram Select Midcap - Regular Plan.
Balanced and Debt Funds:

Nippon India Balanced Advantage Fund, IDFC Dynamic Equity Fund.
Tax-Saving Funds (ELSS):

Axis ELSS Tax Saver Fund, HDFC Tax Saver - Regular Plan, ICICI Prudential Long Term Equity - Tax Saving Fund, Mirae Asset ELSS Tax Saver Fund, Nippon India Tax Saver - ELSS Fund.
Sectoral/Thematic Funds:

Aditya Birla Sun Life Digital India Fund, ICICI Prudential Commodities Fund, Nippon India Value Fund, Kotak Emerging Equity Scheme.
Selecting 5-6 Core Funds
To streamline your portfolio, choose funds that offer:

Diversification Across Market Caps:

Include large-cap, mid-cap, and small-cap exposure.
Sectoral and Geographical Diversification:

Ensure a mix of sectors and international exposure, if possible.
Balanced Risk and Return:

A combination of high growth and stable funds.
Based on these criteria, here’s a selection process for your core portfolio:

Equity Funds
Large-Cap Fund:

Choose a fund focusing on blue-chip companies for stability and consistent growth.
Flexi-Cap Fund:

Opt for a fund that invests across market caps based on opportunities.
Mid/Small Cap Fund:

Select a fund focusing on mid or small-cap stocks for higher growth potential.
Balanced Fund
Balanced Advantage Fund:
Retain a fund that adjusts the equity-debt mix dynamically based on market conditions for balanced risk and return.
Tax-Saving Fund (ELSS)
ELSS Fund:
Pick one ELSS fund that offers good historical performance and tax benefits.
Recommendations for Core Funds
Based on your existing investments and the criteria above, here are 5-6 funds to consider:

Large-Cap Fund:

ICICI Prudential Bluechip Fund: Offers exposure to large-cap companies, providing stability and steady growth.
Flexi-Cap Fund:

Kotak Flexi Cap Fund: Provides diversification across large, mid, and small-cap stocks, capturing market opportunities.
Mid/Small Cap Fund:

PGIM India Midcap Opportunities Fund: Focuses on mid-cap stocks with strong growth potential.
Balanced Advantage Fund:

Nippon India Balanced Advantage Fund: Balances risk and reward by adjusting equity-debt allocation dynamically.
ELSS Fund:

Mirae Asset Tax Saver Fund: Provides tax-saving benefits along with potential long-term growth.
Implementing the Switch
To transition smoothly:

Evaluate Performance:

Compare the past performance, risk metrics, and portfolio holdings of the selected funds.
Check Fund Objectives:

Ensure the new funds align with your financial goals and risk tolerance.
Plan the Switch:

Gradually switch your existing investments into the chosen core funds. Avoid large, sudden shifts to mitigate market timing risks.
Monitor and Adjust:

Regularly review your consolidated portfolio. Make adjustments as needed based on performance and changing goals.
Ensuring a Balanced Portfolio
After consolidating your portfolio, maintain a balanced approach:

Diversify Within the Funds:

Each selected fund should have a well-diversified portfolio across sectors and stocks.
Align with Goals:

Ensure your investments are aligned with your long-term goals, risk appetite, and financial plan.
Stay Informed:

Keep yourself updated on market trends and fund performance. This helps in making informed decisions.
Managing Risks and Returns
While reducing the number of schemes simplifies your portfolio, it’s essential to manage risks effectively:

Avoid Over-Concentration:

Ensure no single stock or sector dominates your portfolio.
Assess Risk Levels:

Consider the risk levels of each fund and how they fit into your overall risk tolerance.
Balance Growth and Stability:

Include funds that provide both growth and stability to cushion against market volatility.
Planning for the Long-Term
To ensure your investment strategy supports your long-term goals:

Focus on Consistency:

Choose funds with a consistent track record of performance across different market cycles.
Reinvest Dividends:

Opt for growth options to benefit from compounding returns over the long term.
Review Periodically:

Regularly review and rebalance your portfolio to stay aligned with your financial objectives.
Final Insights
Streamlining your mutual fund portfolio from 21 schemes to a focused selection is a wise move. Here’s a summary of your next steps:

Consolidate Smartly:

Choose a balanced mix of funds that provide diversification and align with your goals. Opt for stability in large-cap, growth in mid/small-cap, and balanced exposure.
Simplify Management:

Reducing the number of funds makes it easier to track performance, manage investments, and achieve desired outcomes.
Monitor Regularly:

Keep an eye on your consolidated portfolio. Adjust as needed to ensure it meets your long-term financial goals.
Seek Professional Advice:

If needed, consult a Certified Financial Planner to refine your strategy and ensure optimal fund selection.
By focusing on a streamlined, high-quality portfolio, you position yourself for better returns, easier management, and more peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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