Is my strategy of investing in various mutual fund schemes good

I am planning on investment in mutual funds and need some advice on strategy and fund selection. Planning split ratio of 70/30 for equity mutual fund/debt mutual fund. Further planning to split equity investment into 4 parts - Equity: Large Cap (30%) with single fund like - Kotak Select Focus or BSL Frontline Equity, Equity: Multi Cap (30%) with single fund like - Birla Sun Life Equity Fund or Birla Sun Life Advantage Fund or DSP BlackRock Opportunities Fund, Equity: Mid Cap (20%) with single fund like - Kotak Emerging Equity or HDFC Mid-Cap Opportunities, Equity: Small Cap (20%) with single fund like - DSP BlackRock Micro Cap Fund. Planning to split debt investment into 2 parts - Debt: MIP (50%) with single fund like - ICICI Prudential MIP 25, Debt: Short Term/Ultra Short Term (50%) with single fund like - BSL Short Term or HDFC Short Term Opportunities or L&T Ultra Short Term Fund or Tata Ultra Short Term Fund Need to do this in order to have liquidity and withdraw ASAP without much delay if situation warrants. Plan to invest into debt MFs in lump sum and into equity MFs in staggered manner - probably over a period of 12 months. Should I stagger into equity MFs in longer/shorter duration like 18 months/6 months or over 12 months is ok? Want to invest money for Equity investment in Equity: Arbitrage like Kotak Equity Arbitrage or HDFC Arbitrage Fund before moving investment in staggered way to Equity MFs (large/multi/mid/small). Arbitrage chosen over Liquid fund just due to taxation differences. Please suggest if any changes needed in approach and any better mutual funds in each category?

Jul 18, 2017 by Hari, Pune | Mutual Fund

We think, you have done a very good home work and planned your investments well including selection of funds. We can only add the following -

1. DSP BlackRock Micro Cap Fund is not accepting any fresh investments as of now. You may consider Mirae Asset Emerging Bluechip Fund in that place.

2. Mutual fund MIP schemes do not come into debt category. These are hybrid debt oriented funds and they have 5 - 35% equities in their respective portfolios depending upon the mandate and objective of the scheme. However, the taxation of these funds are same as that of debt funds.

3. While planning to invest in debt funds and MIPs have you considered the taxation angle? Do not you think, balanced funds would have been better as they have 35% debt instruments in their portfolio. Long term capital gains and dividends received from balanced fund is totally tax free. Our suggestion is that instead of investing in long term debt funds you can invest in balanced funds (add part of your equity fund allocation to the total of debt funds allocation) provided your investment horizon is 4-5 year minimum.

4. Yes, you can stagger your equity investments over 9 - 12 months through STP. You can invest in liquid or ultra short term funds and transfer to equity funds weekly or fortnightly.

5. With regards to fund suggestions, you may consider adding SBI Bluechip Fund in the large cap category.

6. Finally, as you have planned your investments well, give a thought of linking the same to your long term and short financial goals. Also, review the portfolio / scheme performances at least once every year to ensure that it is aligned with your investment objectives.

Thanks for writing to Advisorkhoj.

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