/How good is my mutual fund portfolio?

How good is my mutual fund portfolio?

I am 25 years old. I am investing in the following schemes through SIP:

ICICI Prudential Value Discovery Fund: Rs 3,000 since 2017
SBI Small Cap Fund: Rs 2,000 since 2019
Aditya Birla Sun Life Tax Relief 96 Fund: Rs 2,000 since 2019
HDFC index Nifty 50 plan: Rs 2,000 since March 2020

I want to invest in multi cap/large cap fund. My investment horizon is for the long term (5-7) years. My risk profile is moderate to aggressive.

Please tell me if I need to add any fund? How is my portfolio? My goal is wealth creation. I have an extra Rs 50,000 I want to put in mutual funds. Which fund I should put it?
-Shaurya Subala

You are currently investing in a value-oriented scheme, small cap scheme, ELSS fund, and large cap index scheme. Your mutual fund portfolio lacks focus. Based on your risk profile, you should try to invest mostly in an appropriate category. For diversification, you can take a small exposure in some other category, again based on your risk appetite.

For this, first you need to define your risk profile sharply. Your stated risk profile is a bit tricky – moderate to aggressive. Only you know what exactly you mean by this risk profile. In our experience, most investors are aggressive in a bull market, and moderate in a bear market.

You should find out your risk profile by taking an online quiz. Do not confuse your risk-taking ability with your risk profile. It mostly got to do with your willingness to take risk – how much you are ready to lose and how much volatility can you tolerate.

You should always choose mutual funds based on your goals, horizon, and risk. The same applies to Rs 50,000 you want to invest. Is it for long-term? If yes, how long you want to stay invested? How much risk are you willing to take? For example, if you are a bit conservative and looking to invest for seven years, you can choose a large cap fund. If you have a moderate risk appetite, you may choose a multi cap fund. If you have an aggressive risk profile, you can choose mid cap or small cap schemes.

What if you want to invest for a short period? You should choose a debt mutual fund based on your investment horizon. For example, if you want to park money for a few weeks, you can choose a liquid scheme. If you want to invest for a few months, you can opt for ultra short duration schemes. If you want to invest for a few years, you should choose a short duration scheme.

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