Home > Finance > Distribute equity assets among small-, mid- and large-caps

Distribute equity assets among small-, mid- and large-caps


I am 25 years old and I earn 70,000 per month. I am interested in building a corpus of 5 crore for buying a house in 20 years. I invest in monthly systematic investment plans (SIPs) of 5,000 each in Nippon India Small Cap, L&T Midcap and Mirae Asset Tax Saver. I am a risk taker and have accumulated an emergency corpus of 10 lakh. I can invest another 30,000 per month. Should I put 15,000 in each of the small-cap and mid-cap funds or take another mid-cap fund and divide among the three. I’m not interested in investing more into equity-linked savings schemes (ELSS) because I’m already putting 1 lakh in Public Provident Fund (PPF). Also, I am planning to invest more aggressively into small-caps and mid-caps till the age of 30, and then gradually I will redistribute my corpus into less risky asset classes such as multi-caps, Nifty or Sensex index funds and hybrid funds, among others. Please advise if my strategy is good enough or should I have a debt component from now itself (other than PPF and Employees’ Provident Fund or EPF)?


Your investment horizon is long and considering your age, equity is a good asset class to build your long-term portfolio. At the same time, allocation within the equity asset class should be spread out among large-, mid- and small-caps. Investing in any one specific class and that too small-caps may not be the best of strategies.

You can consider diversifying within the equity basket. Your schemes are good and can be continued and while you can further add another 5,000 to each of the two existing schemes, you can also add 10,000 in a large-cap fund where you can consider Axis Blue Chip and another 10,000 in a large-and-mid-cap or multi-cap strategy where Mirae Asset Emerging Bluechip is a good option. You need to ensure that you have enough liquidity to take care of any contingencies and for that if you need any debt exposure, you can invest in a liquid or short-term debt fund.

Your investments of 45,000 per month for 20 years will make you accumulate 1.08 crore, which at 12% earnings rate will be at 4.50 crore. So you will be able to achieve close to your target. You should also try to increase your annual savings as the period of investment is long.

I have been investing for the past five months. I have SIPs in Mirae Asset Emerging Bluechip ( 3,000), Aditya Birla Sun Life Floating Rate ( 1,000) and Axis Bluechip ( 1,000). I have a moderate risk appetite and my goal is to save 60 lakh. Is this the correct combination for achieving my target?

—Vidharbh Kumar Tyagi

A combination of large-cap along with large-and-mid-cap having bulk of exposure (60%) and a debt fund should do well over the long term. While your fund selection is good, this does not qualify as moderate risk. You have 80% allocation to equity, so it is an aggressive portfolio. Subject to your risk appetite and with the period of investing being long term, which is assumed to be the case, given the numbers you are targeting, you can continue with the same. You also need to increase your annual savings to be able to reach your targets. For example, 5, 000 per month for 20 years will accumulate 12 lakh, which at 10% earnings rate will grow to 38 lakh. At 11%, it will become 43.7 lakh.

Surya Bhatia is managing partner of Asset Managers. Queries and views at [email protected]

Subscribe to newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Source link

TAGS , , , , ,
Hi guys, this is Kimmy, I started LicensetoBlog to help you with the latest updated news about the world with daily updates from all leading news sources. Beside, I love to write about several niches like health, business, finance, travel, automation, parenting and about other useful topics to keep you find the the original information on any particular topic. Hope you will find LicensetoBlog helpful in various ways. Keep blogging and help us grow as a community for internet lovers.