My MF Portfolio Review please!!

Dear Vikay, Your MF (Equity) portfolio looks fine. May I know if you are a salaried individual? Do you contribute to EPF? Kindly note that Debt funds too come with certain risks? Are you looking for capital preservation? Personally, i prefer below hybrid funds;

• HDFC Hybrid Equity Fund
• ICICI Prudential Equity & Debt Fund
• SBI Equity Hybrid Fund

Dear Sree Thank you for your response. No I am not salaried employee but self employed small time freelancer.  My income is not steady and sometimes i receive surplus which i try to invest in Mutual Funds and PPF while many times it is just enough to meet the monthly expenses. I am investing in PPF, however having now understood importance of asset allocation, my Equity to Debt is at present 80:20 and i am 48 years old.  I am now focusing to redeem some of existing overlapping and non performing mutual funds and put it in a fix income and aim to do bring the ratio to  60:40.  Since PPF is not suitable for rebalancing, I am in search of few good debt funds.  However things happening in the debt fund scenario with the recent being Franklin Ultra Short Term bringing down their NAV sharply is making me nervous.  Yes I do understand the risk involved in debt funds after reading several articles of your blog and others.  Hence I am trying to invest in funds that give reasonable returns but not at the cost of Capital. Investing in FD is an option but because of non efficiency of tax compliance , TDS etc, I prefer debt funds over it.  Also playing too conservative when my goal is 10 to 12 years for retirement may shrink my overall corpus which i am trying to build to live gracefully after retirement. Your thoughts on this please.  Regarding HDFC Hybrid, i think did not make a wise decision of redemption and putting it in Mirae Hybrid.  The reason i did that was due to 2 reasons (again got literate by reading many articles). 1)  Large AUM size may lead to under performance  2)  I already had HDFC Mid Cap which again has large AUM.  So i thought i will go with a relatively new entrant but managed by Mr Neelesh Surana who has other good peforming funds to his credit.  Digging deeper, i now find HDFC Hybrid have good down side protection over all other funds in the category.  Anyways, even if i have to reverse my decision, i will do it in the next yearly review as i have to keep the implications of STCG in mind. Please give me few suggestions in the debt fund area.   How about not investing in debt funds and go with a conservative hybrid or even HDFC Hybrid please for the next 5 years and then slowly shift to fix income category then?   Thank you once again   Vikas  

Dear Vikas ji, Considering your job profile, agree with you that your asset allocation ratio needs to be fixed/looked into. Suggest you to max out (Rs 1.5 lakh) in PPF every FY, this can be marked to your retirement Goal. You can have a look at Arbitrage Funds for re-balancing and certain debt funds which have high exposure to Govt securities (Gilt Funds). If preservation of capital is important then debt funds with lower Default risk can be considered. Interest rate risk cant be avoided with most of the debt funds, as it depends on many factors.  

Dear Vikas,

1. Nothing wrong in picking two hybrid funds. You may do a little more research on returns and risk ratios. Suggest you to pick 3 to 4 more equity hybrid funds like SBI hybrid, ICICI Equity and Debt, Mirae, HDFC, Principal etc.,
2. Debt side of my portfolio is with Bank FDs only. As I am already taking suficient risk on Equity, real estate side, wanted my debt allocation to be as safe as possible. Given the current scenario with NPAs, compliance (tax) issues, Liquidity issues with companies, avoiding Debt funds for time-being. For creating emergency fund - one can consider Liquid debt funds, overnight debt funds and/or Arbitrage funds as well.
3. That's good!