I have been investing in Equities for last 5 years but without any direction, just picking up star rated ones from value research. Also I was unaware of importance asset allocation.
I am now in process of chopping and trimming the accumulated funds and have short listed the below.
1) Parag Parikh Long Term (Multi Cap) 2) HDFC Mid Cap 3) Mirae Asset Agg Hybrid.
For Debt category, I am investing in PPF which will be my core, I have short listed other debt funds for purpose of re-balancing and capital preservation as below.
1) HDFC Short Term 2) ICICI Pru Arbritrage 3) Franklin India Savings.
My investment horizon is about 10 to 12 years for retirement.
Kindly advise if i am on the right track .
Also can i treat Mirare Hybrid as my core portfolio by investing 50% of the total corpus in Equity? From what I read it seems the most volatile but also has large cap orientation hence this query please.
Your review and suggestion is kindly requested.
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
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
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.
Thank you for your response.
1) Is there any harm in investing both HDFC Hybrid and Mirae Hybrid. I know there is about 35% overlap but considering the fact that I am planning to invest 50% of Equity portfolio allocation, would it not be good to invest in two different companies with different mindset of management? Within the Hybrid category, HDFC plays safe with good down side protection while MIRAE possibly will give me that little extra punch being slightly volatile? It is contra thinking but I feel i should invest 25% each among these funds. So the Equity folio will have 50% Hybrid ( 2 x 25%) Core , 30% Multi and 20% Mid Cap. Your thoughts on this please.
2) I read in your other blog that you have stopped investing in Debt funds? Any particular reason behind it please? As per your suggestion, i will pick one Arbritrage fund ie ICICI Arbritrage. Any suggestion for low default risk in Debt funds please? I am totally new to Debt funds and this will be my first investment.
3) I am not sure if i can max fully in PPF along with MF investment. But got your idea for bringing 60:40 allocation, i should now be putting max in safe debt instrument like PPF
Thank you for your valuable suggestions.
- 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.,
- 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.
- That’s good!
Thank you for your insight. I truly appreciate your initiative to solve queries of persons like me. Regards Vikas