Mutual Fund Corner: All your queries answered

 

A: The methodology adopted by you in creating your portfolio seems good i.e. looking at different parameters before shortlisting the scheme to invest into and thereafter, picking one scheme from each category of large cap, mid cap etc. However, some minor changes can be made. For a monthly investment of Rs 51,000, you can split it into five schemes instead of three to cover some more of the market.

You can invest Rs 10,000 each in IDFC Nifty Fund, which is an Index Fund (passively managed large cap index fund); Axis Bluechip Fund (Actively managed Large Cap fund); Canara Robeco Emerging Equity Fund (Large & Mid Cap Fund); ICICI Value Discovery Fund (Value Fund) and SBI Magnum Multi Cap Fund (MultiCap Fund).

Short Term Capital Gains (STCG): For holding period less than one year STCG is 15 percent. For NRI's TDS at 15 percent + cess will be deducted at the time of redemption.

Long Term Capital Gains (LTCG): For holding period more than one year LTCG is 10 percent. TDS at 10 percent + cess will be deducted at the time of redemption.

A: When you switch from one scheme to another the following will be the impact: i) Exit load: If you switch out of a scheme within the period for which there is an exit load, then you will be levied an exit load. ii) Tax: If there is a gain Short Term or Long Term, then you will have to pay the income tax as applicable. Therefore, when you switch from one scheme to another, it invariably is a process of selling out of one scheme and investing in another, so the impact will be accordingly. Only in case of two schemes getting merged together, it's not treated as selling out and then investing again. When you switch out of a regular plan to a direct plan, then also it is treated as selling out of regular plan and investing fresh in direct plan so all costs and tax provisions will apply. If you are invested in a scheme, which is not doing well and you also believe that it will not recover back, then you should not let exit load or tax impact prevent you from redeeming out.

A: Let’s evaluate your portfolio in two parts: Existing schemes and allocation and amount invested per month and targeted corpus requirement. You are investing Rs 5,000 per month in equity mutual funds, Rs 4,700 in NPS and Rs 10,000 per month in PPF. Existing Schemes: Too many ELSS schemes for a monthly investment of Rs 5,000. Stop HDFC Tax Saver and ICICI Long Term Equity Fund and invest the entire Rs 4,000 per month in Franklin India Tax Shield. Continue with ICICI Pru Value Discovery fund. Investment per month against targeted corpus: Your goals are at least 10-15 years away but your allocation is more towards debt (PPF Rs 10,000 and Equity Rs 5,000). It has to be the other way around where you will invest Rs 10,000 in equity and Rs 5,000 in PPF. Increase your Equity SIP by another Rs 5,000 and reduce your PPF. Invest the non ELSS Rs 6,000 as follows:

i) ICICI Value Discovery Fund – Rs 2,000

ii) HDFC Mid Cap Opportunities Fund – Rs 2,000

ii) SBI Magnum Multi Cap Fund – Rs 2,000

With just Rs 10,000 in equity SIP and Rs 5,000 in PPF, you will not be able to accumulate Rs 10-15 crore in 10-15 years. So keep increasing your investments every year by as much as possible. Finally, I suggest that you chalk out a reasonable targeted sum keeping in mind current costs and estimated future costs. As of now, Rs 10-15 crore looks unreasonable given the overall financial information as provided by you.

A: I will suggest two changes for you. Stop DSP Small Cap Fund and add a pure Large Cap fund i.e. Axis Bluechip Fund. For the fresh Rs 5,000, split it into two schemes and invest in your existing schemes as follows: Rs 2,500 in SBI Magnum Multi Cap and Rs 2,500 in Birla Frontline Equity Fund.

A: Yes, you can do a SIP for three years period. After three years of investing via SIP, you can continue to be invested without any further inflow and just let that money grow in case you do not need it.

A: SBI Consumption Opportunities Fund and ICICI FMCG Fund are good options in this category.

A: From a long term perspective, I would suggest that you invest in a diversified scheme rather than a dedicated small cap fund. Accordingly, stop your investment in HDFC Small cap and instead invest in Mirae Asset India Equity Fund. Rest of the schemes are fine and you may continue.

A: The scheme name has changed to Franklin India Equity Fund and it continues to be a multicap fund. This is a very old scheme (launched in 1994) and has a good track record. You may continue with the same and perhaps review the performance after another 6 months.

A: This is a sector fund, so if you are comfortable with a sector fund then this is a good scheme to invest into. I hope you understand that sector funds need to be monitored and tracked regularly when compared to other diversified schemes. So if you are sure to invest in an IT sector fund, only then go ahead. Do not only look at past 1-2 years returns and pick the scheme.