By Dhaval Kapadia
I had redeemed some units from my mutual fund SIP a year ago as I wanted money for an emergency. Now I have got a bonus. Should I invest the amount in a lump sum in the same fund or increase the SIP amount?
For deploying the additional corpus, you should evaluate your portfolio from an asset-allocation point of view and build exposure in line with your recom-mended asset allocation. From a diversi-fication lens, one should also evaluate the sector and style diversification (value/growth) at a portfolio level, and also the extent of overlap in the equity funds in your portfolio to assess the true degree of diversification the portfolio equity funds offer.
You should look to diversify your portfolio across two or more funds (depending on desired sub-asset class exposure and investable corpus) to reduce conc-entration to the calls of a single fund manager.
Consider some allocation to internat-ional equities (10-25% of your equity allocation) as these offer diversification across geographies with exposure to diverse growth drivers, and also offer a hedge against the depreciation of the rupee. Given valuations are currently high relative to their long-term average, avoid investing any lumpsum amount and invest in a staggered manner.
You should evaluate the performance of the funds in your portfolio vis-à-vis that of their respective category peers. If a fund has been delivering below-average performance consistently, you may switch to a more consistent one.
I have invested in MF Axis Blue Chip Direct SIP since 2005 and Axis Mid Cap Direct since 2015 as one-time invest-ment. Should I continue in both?
The current funds in the portfolio have performed well over the past 5-7 years and one can continue with them, unless there’s a liquidity requirement. Axis MF follows a quality & growth style of equity investing. A quality & growth style may witness periods of significant outperf-ormance-when the style is favoured by markets (as in 2018-19) and may see underperformance in other periods such as the recent 6-9 months.
Any additional investment into equity funds can be made in funds from other AMCs with varied style of equity investing to diversify the portfolio. Focus on the overall asset mix in your portfolio.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to email@example.com