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    Is my mutual fund portfolio diversified?

    Synopsis

    If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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    I am 24 years old. I am planning to invest in the following mutual fund schemes through SIPs:
    Parag Parikh Flexi Cap Fund - Rs 6,000
    Canara Robeco Bluechip Fund - Rs 5,000
    Mirae Asset Emerging Bluechip Fund - Rs 5,000
    Kotak Small Cap Fund - Rs 2,000
    Axis Small Cap Fund - Rs 2,000
    My risk profile is moderate and investment horizon is 7-10 years. Will it be a well-diversified portfolio?

    --Maha Ravichandran


    You seem to be new to mutual funds. You say you are a moderate investor but you have selected small cap and large & mid cap funds. You should remember that small cap funds and large & mid cap funds have higher risk. They are suitable for aggressive investors with higher risk appetite. They also require long investment horizon. Keep these things in mind if you are investing in these schemes.

    Diversification is not about investing in every possible mutual funds. It is about spreading your risk and maximise returns. However, you should not forget your risk profile in your quest to maximise your returns. In this case, a moderate investor like you should invest mostly in flexi cap schemes. If you want to diversify and reduce risk, you can invest in large cap schemes and equity hybrid schemes. However, you should not invest in riskier options like small cap funds to maximise returns. Most new investors lose their patience and abandon those investments when the markets become volatile. Often they sell their investments at huge loss.

    If you are not very clear about mutual funds and need regular advice, find a good advisor near you. Invest for a few years and gain experience and confidence. Then you can think of investing directly in mutual funds.

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