Individual vs Common family portfolio for couples

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TarunS asked 8 years ago

Hi Sreekanth, Hope you are doing fine. I have a query for you as explained here - Both myself and my wife are working and I created below portfolios for both of us 2 years back. I have also mentioned monthly SIP amount against each fund. I have 6 funds in my portfolio while my wife portfolio has 7 mutual funds. All these funds are direct with growth option. My portfolio (6funds)- SBI Bluechip-10000 HDFC Equity- 5000 Birla SL tax relief 96- 4000 Axis LTE- 3500 L&T India Value Fund- 5000 Franklin India Smaller companies- 10000 Wife's portfolio (7funds)- SBI Bluechip- 10000 ICICI Prudential Focused BlueChip Equity-G- 5000 HDFCCapitalBuilder- 6000 Franklin India tax shield- 5000 Birla SL tax relief 96- 5000 HDFC Midcap Opp- 12000 HDFC Balanced/HDFC Hybrid Equity- 6000 I created these portfolios as 2 individual portfolios assuming both should work well for all our goals which are at least 10-15 years away. But recently I had a feeling that probably we as a family should have one portfolio as our goals are common and there is no individual goal among us. If I go by this logic, our combined fund count comes as 11 (6 + 7 - 2 common funds) which seems little too many. I was okay with 6 or 7 funds in a portfolio but 11 funds doesn't look good at all. Now I'm little confused on trimming this combined portfolio. I can easily remove 2 ELSS funds out of 4. Also I can assume HDFC Hybrid equity as out of portfolio because that's not actually for long term. I have just kept in here to cover any unplanned requirement, 5-6 years down the line. This way our total fund count will come as 8. Please advise if this is okay or I still need to trim/tweak this a bit more. Other than these, we already have our term insurance, health insurance, emergency fund, debt allocation in place. Thanks !

5 Answers

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Sreekanth Staff answered 8 years ago

Hi, Your view is correct! Investing in too many funds leads to over-diversification and may not be really beneficial. If your goals are one and the same and have same investment time-frame then you can surely try to trim your portfolio. Kindly check the funds portfolios overlap and can take your decision. (Individually, almost all the above listed funds are decent ones, but try to maintain a minimalist portfolio..) Kindly go through below articles and revert to me if you have any queries;

TarunS replied 8 years ago

Hi Sreekanth,

Thanks for your response and yes I have seen these articles earlier as well. Based on my understanding I have curtailed the common portfolio as mentioned below.

I still have just one confusion on a multicap fund, not sure if I can continue with HDFC equity or I should pick one of three suggested by you in ‘best mutual funds’ article. Out of those 3 ‘Aditya Birla SL equity’ seems more suitable. I understand HDFC Equity hasn’t been performing well since last few years and this one is the first fund I picked more than couple years back based on someone’s advise, at that point of time I didn’t have any clue about all these basics.
Also you can see our common portfolio doesn’t have any fund from well known AMC’s like DSP black rock, Mirae Asset and Reliance.

Please share your views if this seems good and if you see any more issue with our portfolio. I never wanted to behave like churners trading but I guess this is one time job needs to be done now.

ICICI Prudential Focused BlueChip Equity-G 5000
SBI Bluechip 20000
HDFC Equity/ABSL Equity 11000
Franklin India tax shield 9000
Birla SL tax relief 96 9000
L&T India Value Fund 5000
HDFC Midcap Opp 12000
Franklin India Smaller companies 10000

There are still 8 funds in this common portfolio. I can also think about removing ICICI Prudential Focused BlueChip Equity-G, keeping SBI bluechip as only large cap. Please advise.

-Thanks!!

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Sreekanth Staff answered 8 years ago

Hi, There is nothing wrong in your analysis/viewpoint and you are right in reviewing your portfolio once in a while. Cheers! 1 - Any specific strategy for picking two large-cap funds? 2 - Are you investing in ELSS funds for tax-saving? Or are you done with 80c bucket without investing in ELSS funds?

TarunS replied 8 years ago

1. None, I just added ‘ICICI Prudential Focused BlueChip Equity-G’ around year n half back to increase large cap percentage. And selecting another fund was just for adding diversification. But probably not required here.

2. Yes both myself and my wife are investing in ELSS funds for tax saving purpose only. Also I understand ELSS funds are like multicap funds so assume them while calculating multicap percentage in my portfolio.

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Sreekanth Staff answered 8 years ago

Hi, Yes, even I consider ELSS funds as typical multi-cap funds. But, given the market conditions and fund manager's investment style/strategy, some ELSS funds like Franklin Tax shield opt for higher exposure to large-cap stocks. So, may be you may pick just one large cap fund and anyways you have Franklin taxshield which maintains (generally) higher exposure to large cap. You may consider Birla Equity Fund.

TarunS replied 8 years ago

Thanks much Sreekanth for all your help and suggestions. I was able to re balance our equity portfolio based on your suggestions.

Now I wanted to talk little bit on Debt funds allocation. Since there are no short term goals visible, we normally used to put major amount in Arbitrage funds and MIP. Now tax benefit is not available in Arbitrage funds and also return of Birla SL MIP 2 wealth 25 plan (now Aditya Birla Sun Life Regular Savings Fund) is 2.75% in last one year.

I am not sure of where to put available lumpsum amount for 2-4 years period for good returns. I still have enough emergency fund invested in liquid and arbitrage funds. In worst case I may need to go for balance funds through SIP only but in that case I don’t expect to touch money earlier than 6 years. Please advise.

Thanks!!

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TarunS answered 8 years ago

Thanks much Sreekanth for all your help and suggestions. I was able to re balance our equity portfolio based on your suggestions. Now I wanted to talk little bit on Debt funds allocation. Since there are no short term goals visible, we normally used to put major amount in Arbitrage funds and MIP. Now tax benefit is not available in Arbitrage funds and also return of Birla SL MIP 2 wealth 25 plan (now Aditya Birla Sun Life Regular Savings Fund) is 2.75% in last one year. I am not sure of where to put available lumpsum amount for 2-4 years period for good returns. I still have enough emergency fund invested in liquid and arbitrage funds. In worst case I may need to go for balance funds through SIP only but in that case I don't expect to touch money earlier than 6 years. Please advise. Thanks!!

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Sreekanth Staff answered 8 years ago

Hi, Generally, a raising interest rate scenario is not that good for Debt Mutual fund category. However, for a 2 to 3 year tenure, you may consider Short Term Debt Funds or any Secured Non-Convertible Debenture Issues (short term ones - 3 year term).