I’m investing in flexi-cap funds for the previous six months and have lowered my publicity to small-cap and mid-cap funds. Is it the correct determination?
— Pradeed Gauba
Flexi-cap funds can make investments throughout market-cap (giant/mid/small-cap shares) based mostly on the view of the fund supervisor involved on evolving market conditions. Valuations play an important position whereas figuring out publicity to any asset class /safety. Lower valuations cut back the chance of excessive future capital loss and enhance upside potential, and vice-versa.
With the current correction in markets and robust earnings by corporates, valuations have seen some moderation. Focus on the look-through allocation throughout market-cap segments of their portfolio. The bulk of the fairness allocation in a portfolio must be into large-cap equities (80-85%) as they’re much less dangerous than midcap and small-cap equities that are extra risky and contain increased danger relative to large-caps. Based on present valuations, one may be barely chubby the large-cap phase and underweight the mid-and small-cap phase vis-à-vis goal allocations. Consider allocation to worldwide equities (~10-20% of your fairness allocation) for diversification throughout geographies with publicity to various development drivers, and in addition provide a hedge towards the depreciation of the rupee.
Is it a greater concept to take a position a small sum of money in a number of funds?
— TS Mani
Mutual funds have a tendency to carry diversified underlying portfolios, usually 40-50 shares for fairness funds and 30-40 securities for debt funds. Hence the target of holding a diversified portfolio of mutual funds must be to keep away from focus at asset class, fund supervisor and funding technique ranges. For small investments, one can take into account investing in hybrid funds like month-to-month earnings plans, balanced funds, asset allocation funds, and many others., which give various publicity to fairness, debt and gold, thereby decreasing the necessity to maintain a number of funds throughout asset courses. Thus, for smaller investments, one can maintain 4 to 6 funds in a portfolio.
The author is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to [email protected].
Source: www.financialexpress.com”