personal finance

Is it okay to invest in 25 mutual fund schemes? Should we cut it down to 10?

I am 35 years old and my wife is 33 years old. I have a three-year-old kid. We can save money only if there is a regular deduction from account, otherwise we spend money here and there. Therefore, we started SIP with few ELSS funds in 2017. In 2019, we diversified into more funds. Our investment horizon is 10 to 15 years (can be increased). Our risk profile is moderate to high. Below is the snapshot of my investment.

We have two reasons for these investments: a good corpus for retirement and child’s education.

We took decision in hurry to invest in more than 25 funds, but now we worry whether we took the right decision by investing in more than 25 funds. Should we cut it down to less than 10 or 15 funds or even less?

DSP Tax Saver Fund: Rs 2,000 (Jan-17)
L&T Tax Advantage Fund: Rs 2,000 (Jan-17)
Aditya Birla Sun Life Tax Relief 96: Rs 2,000 (Jan-17)
ICICI Prudential Long Term Equity Fund: Rs 2,000 (Jan-17)
Axis Long Term Equity Fund: Rs 1,500 (Apr-19)
HDFC Taxsaver Fund: Rs 1,500 (Apr-19)
Mirae Asset Tax Saver Fund: Rs 1,500 (Apr-19)

Large Cap schemes:
Mirae Asset Large Cap Fund: Rs 2,000 (May-19)
Reliance Large Cap Fund: Rs 1,500 (May-19)
SBI Bluechip Fund: Rs 1,500 (May-19)
Axis Bluechip Fund: Rs 1,500 (May-19)

ICICI Prudential Banking and Financial Services Fund: Rs 2,000 (May-19)
Aditya Birla Sun Life MNC Fund: Rs 1,500 (May-19)

L&T India Value Fund: Rs 1,500 (May-19)

Small Cap:
Reliance Small Cap Fund: Rs 2,000 (May-19)
SBI Small Cap Fund: Rs 2,500 (May-19)
DSP Small Cap Fund: Rs 2,000 (May-19)
Franklin India Smaller Companies: Rs 2,000 (May-19)
HDFC Small Cap:Rs 1,500 (May-19)

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Kotak Standard Multicap Fund: Rs 1,500 (May-19)
Mirae Asset Focused Fund: Rs 1,000 (May-19)
Motilal Oswal Multicap 35 Fund: Rs 1,500 (May-19)
SBI Magnum Multicap Fund: Rs 1,500 (May-19)

Kotak Emerging Equity Scheme: Rs 2,000 (May-19)
L&T Midcap Fund: Rs 1,500 (May-19)
DSP Midcap Fund: Rs 1,500 (May-19)
HDFC Mid-Cap Opportunities Fund: Rs 1,500 (May-19)

Large and Midcap:
Mirae Asset Emerging Bluechip Fund: Rs 2,000 (May-19)
–Ravish Malhan

Firstly, you don’t need 25 schemes to have a diversified mutual fund portfolio. Most financial planners believe that you don’t need more than four to six schemes to achieve optimum diversification.

Here are a few pointers for you. One, you should try to quantify your two goals. For example, find out your target retirement and kid’s higher education corpus. Find the current cost of your goal and inflate it by a realistic number to reach a reliable target. For example, if a course cost Rs 10 lakh now and after accounting for an annual inflation of 8 per cent, the course would cost Rs 31.72 lakh after 15 years. Next, find out how much you need to invest to create the target corpus. In this example, you need to invest Rs 6,350 every month to create a corpus of Rs 31.72 lakh after 15 years. Ideally, you should shift the money from equity mutual funds at least two to three years before your goal to safeguard it against any sudden volatility in the stock market.

Two, try to define your risk profile sharply. Take an online quiz if necessary. It will help you to have a focused portfolio in line with your risk appetite. Once you know your risk profile, you should get rid of the schemes that are in line with your risk appetite. Next, try to prune the portfolio by avoiding schemes that have identical portfolios.

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If these tasks sound too much to handle, try to hire a financial planner (only if you need a proper financial plan) or a mutual fund advisor to help you with the task. Gain enough experience, knowledge and confidence before taking care of your investments.


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