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How to divide my mutual fund investments in the portfolio

Thank you Pradip for your valuable information. Regarding strategic division of monthly SIP funds I always had this doubt in my mind that "How to divide my funds in my portfolio?" For example - If I were to start a new monthly SIP for - Rs. 20000, this is for long term corpus building and keeping the time horizon for 15-20 years, there can be multiple combinations on how that money can be invested into MFs, I am taking 3 scenarios - Option 1) Divide the amount equally into two good Large Cap funds, Or Option 2) Choose 2 best performing funds from each category - Large Cap and Diversified (that will be 4 funds in total) and set SIP for Rs. 5000 monthly into each funds, Or Option 3) Divide the money equally into Large Cap/Diversified and Mid-Small Cap funds. According to you, which option should be better and why? How frequently should we review our portfolios and based on what criteria should we increase or decrease the SIP amount? Sorry for being so inquisitive but I just wanted to know that when it comes to start a new SIP or change the monthly contribution in an existing portfolio is there a defined strategy like thumb rule in the world of MF investment? Please guide what should be the right approach?

Jun 8, 2017 by Mrinmoy Bhattacharya, Bangalore  |   Mutual Fund

There are no thumb rules as to how you should allocate your investments into various category of funds. The selection of funds or allocation should be based on two things – risk profile and investment horizon. Therefore, before investing in mutual funds, you should be aware of this and select funds accordingly.

If you ask for our opinion, we will suggest you to keep it simple by investing only in diversified equity funds. This is simply because diversified funds invests across all market cap and sectors and therefore, you will get stocks of large, midcap, small and other companies in a diversified equity portfolio.

With regards to review of your mutual fund portfolio, once every year is fine. You can stop and start SIPs anytime you wish but the AMCs need at least 3-4 week’s time to action any of these. The SIP amount can be increased in the existing folio by submitting a new auto debit form to the AMC along with the additional amount cheque by which you want to increase the SIP.

Hope we could answer all your queries.

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