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Should I continue investing in MF schemes despite a cut in ratings?


I have invested in three mutual funds with SIPs of 3000 for the past 4-5 years. I’m a long-term investor. These are DSPBR TOP 100 Equity, HDFC Top 200G and IDFC Premier Equity Growth. The ratings on the above three mutual funds schemes have come down recently. Shall I continue investing in these funds further through SIPs mode, or should I stop investing and redeem? If I stop further SIPs, in which mutual funds shall I start my new SIPs?

— Name withheld on request

Knowing an investor’s investment horizon, risk appetite, and goals is vital before suggesting an investment approach. Suppose someone is investing for a long term (more than 7-8 years) and has an aggressive risk appetite, in that case, he can think of building a portfolio around equities as it has the potential to deliver a superior return. If someone is investing for the medium term (more than 3-4 years), one can think of investing a large part of the portfolio in Dynamic Asset Allocation in the Hybrid category. As you have mentioned that you are a long-term investor, we assume that your risk appetite is aggressive, and the purpose of investment is to create wealth over a period of time.

As far as your existing investment is concerned, it is purely equity-oriented, which is large-cap biased. We would suggest building the portfolio in equity in those categories, which maintains exposure across the market capitalization. Hence, you may rebuild your portfolio and divide your total monthly investable amount equally among funds: HDFC Large & Mid Cap Fund, Kotak Multi Cap Fund & SBI Contra Fund. This way, your portfolio will be diversified across the category, geography, and AMCs. It is also advisable to review your portfolio at least once a year.

The query is answered by Rajiv Bajaj, chairman & managing director, Bajaj Capital Ltd. If you have any personal finance queries, write to mintmoney@livemint.com to get them answered by experts.

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