[Naetik30]

I have been investing in MFs since about 10 years now. I have been a DYI investor and did a lot of learning on my own. Over the years, started with a Large cap and a flexi cap. Then added a NIFTY 50 fund, another flexi cap, a mid cap and a couple of small caps.

I also had a focused fund that I fully exited due to bad performance. (This was Axis foxussed 25 fund).

I know, I have too many funds. And also learnt it the hard way that index funds are better.

List of funds I currently invest in
1. ICICI Pru Bluechip fund
2. UTI Nifty 50 index fund
3. UTI Flexi cap fund
4. Parag Parikh Long Term Equity
5. HDFC Mid cap opportunities fund
6. Nippon Small cap
7. SBI Small cap

The UTI Flexi cap has been performing little bad. But still continuing - in the past when the ICICI Pru Blue chip performed badly, the UTI flexi cap used to perform well.

My question to the seasoned investors - If you were in a similar situation earlier, how did you go about pruning your funds? How did you move from actively managed to index funds? At what instances did you exit? Or did you not exit the active funds at all?

I am planning to get my MF portfolio to 65% large cap, 25% mid cap and 15% small cap. But would like to move to a purely index based funds portfolio. But freeze up whenever I try to do something about it.

For foreign equity exposure, I have my employers shares in the NYSE (through RSU and ESPP). This is a sizeable chunk. About 30+% of my equity exposure in a single stock. So planning to sell some of that off as well to reduce risk. But want to have a plan on how to reinvest if and when I sell the employers shares.

[thirugata]

Originally Posted by Naetik30

I am planning to get my MF portfolio to 65% large cap, 25% mid cap and 15% small cap. But would like to move to a purely index based funds portfolio. But freeze up whenever I try to do something about it.

How are you planning to achieve this ?
I am asking this because, a Largecap fund can be largecap fund just by investing approximately 2/3rd into largecap. So if you just go by the name, you might end up with about 44% in largecap stocks.

So one needs to take into consideration breakup of each fund and calculate to understand the actual % allocation.
Of course this balance might change once you start investing as FM churns the holdings, but broadly it will remain in a range with 3 -4% variation.

Originally Posted by Naetik30

For foreign equity exposure, I have my employers shares in the NYSE (through RSU and ESPP). This is a sizeable chunk. About 30+% of my equity exposure in a single stock. So planning to sell some of that off as well to reduce risk. But want to have a plan on how to reinvest if and when I sell the employers shares.

If you wish to continue holding foreign equity if you sell portion of the employers share, there are options to buy MF( Fund of Fund) or ETFs of Nasdaq/ S&P500.

Happy investing.

[Naetik30]

Originally Posted by thirugata

How are you planning to achieve this ?
I am asking this because, a Largecap fund can be largecap fund just by investing approximately 2/3rd into largecap. So if you just go by the name, you might end up with about 44% in largecap stocks.

So one needs to take into consideration breakup of each fund and calculate to understand the actual % allocation.
Of course this balance might change once you start investing as FM churns the holdings, but broadly it will remain in a range with 3 -4% variation.

Thanks @thirugata. I am not refering to the fund type for the % calculation. Apps like ET Money show the % allocated to large cap, small cap and mid cap by analysing the entire portfolio holding of each of the MFs. Currently the break up about 77% in large cap, 15% in mid cap and 8% in small cap. I want to change this by increasing allocation to the mid and small cap funds.

[thirugata]

Originally Posted by Naetik30

Thanks @thirugata. I am not refering to the fund type for the % calculation. Apps like ET Money show the % allocated to large cap, small cap and mid cap by analysing the entire portfolio holding of each of the MFs. Currently the break up about 77% in large cap, 15% in mid cap and 8% in small cap. I want to change this by increasing allocation to the mid and small cap funds.

The following is the breakup of HDFC midcap fund:
The fund has 91.43% investment in domestic equities of which 3.81% is in Large Cap stocks, 55.42% is in Mid Cap stocks, 18.16% in Small Cap stocks

This for SBI Smallcap :
The fund has 85.75% investment in domestic equities of which 0.66% is in Large Cap stocks, 7.77% is in Mid Cap stocks, 48.25% in Small Cap stocks

This is what I meant, before you choose a fund, you need to look at this statistic to understand what is the true allocation that will happen by choosing the fund.

And if you add up roughly 10-15% goes into others category in each fund which could be money market instruments or cash held or whatever.
So largecap+midcap+smallcap ≠100%

[vijaykr]

Originally Posted by Naetik30

My question to the seasoned investors - If you were in a similar situation earlier, how did you go about pruning your funds? How did you move from actively managed to index funds? At what instances did you exit? Or did you not exit the active funds at all?

If the list of funds you have is all you are holding currently, then personally I don't think these are too many. I have more and working on pruning the list down myself. And yes, with the continuously growing size of index funds and active funds not consistently beating their benchmarks, I believe the cost effective nature of index funds will be better for me and reduce my FOMO as to whether I have the best-performing funds

Originally Posted by Naetik30

I am planning to get my MF portfolio to 65% large cap, 25% mid cap and 15% small cap. But would like to move to a purely index based funds portfolio. But freeze up whenever I try to do something about it.

The approach I have followed to increase my index fund investments is mainly three things:
1) Identify laggards in my active MF portfolio. Funds that have underperformed or not consistently delivered the returns I expected initially. Redeemed those in an event-based (market highs OR simply don't believe in them anymore!) / time-based (tax implications etc.) manner and reinvested into index funds
2) Other than underperformers, I had multiple funds in large-caps, 2 mid-caps etc. In each category, I picked 1 or at most 2 funds and aggregated holdings into them using the same event/time-based approach above
3) Stopped all SIPs into active funds in 1) above. Redirected SIPs and all new lumpsum investments to index funds

This way I was able to rebalance the active/index fund mix over some years which also helped avoid fear of taking any action as I didn't want to make bad decisions/choices.

Originally Posted by thirugata

If you wish to continue holding foreign equity if you sell portion of the employers share, there are options to buy MF( Fund of Fund) or ETFs of Nasdaq/ S&P500.

My knowledge is limited on this, but what I read is that if foreign equity is sold then the funds have to be got back to India within 90 days of sale. These proceeds cannot be reinvested into foreign stocks/ETFs directly from a trading/broking account overseas. I have asked my CA about this and waiting to hear back.

[thirugata]

Originally Posted by vijaykr

My knowledge is limited on this, but what I read is that if foreign equity is sold then the funds have to be got back to India within 90 days of sale. These proceeds cannot be reinvested into foreign stocks/ETFs directly from a trading/broking account overseas. I have asked my CA about this and waiting to hear back.

What I recommended is investing in India, the ETFs are traded in NSE. I dont invest in overseas market directly. So my recommendation was to choose from what is available in India.

[Naetik30]

Originally Posted by thirugata

What I recommended is investing in India, the ETFs are traded in NSE. I dont invest in overseas market directly. So my recommendation was to choose from what is available in India.

A general question on ETFs - how good is the trade volume for ETFs in India? In other words is there enough demand on a daily basis in case we want to sell them at some point?

Or is it better to go via the MF route to invest in foreign equity, even though the cost is higher.

[thirugata]

Originally Posted by Naetik30

A general question on ETFs - how good is the trade volume for ETFs in India? In other words is there enough demand on a daily basis in case we want to sell them at some point?

Or is it better to go via the MF route to invest in foreign equity, even though the cost is higher.

On NSE website https://www.nseindia.com/ you can ETF name you are interested in and go to historic data tab to know the daily traded volume. You can choose the time period like 3 months, 6 months to get better understanding of the volume trend there.

In general, not every ETF has good volume, but there are quite a few with good volumes.
I am not mentioning any name here because a good volume is a subjective thing and everyone has their own benchmark.

[srikanthns]

Originally Posted by Naetik30

I know, I have too many funds. And also learnt it the hard way that index funds are better.

List of funds I currently invest in
1. ICICI Pru Bluechip fund
2. UTI Nifty 50 index fund
3. UTI Flexi cap fund
4. Parag Parikh Long Term Equity
5. HDFC Mid cap opportunities fund
6. Nippon Small cap
7. SBI Small cap

.

It does not appear to be too many funds.
The action depends on the age of the individual and the tenure of investment also.
If at all you want to prune, 1,2,3 can be merged and one single index fund will suffice. Active funds beating Index is a mirage and each block of years, top performer will be a different fund and after some amount of corpus, it will be difficult for you to churn the portfolio.
Small caps, depends on how long is the investment horizon. Still, one fund may be enough. If that fund underperforms for 3 years or so, you can shift to another.
Next, i do not see a risk reduction strategy by including debt funds as part of the portfolio. If the tenure is more than 10 years, better to put a portion of the investment (15%) in to a gilt fund. This can be used to buffer the shocks from equity side.
My two cents.

[Neomobile]

Originally Posted by Naetik30

I know, I have too many funds. And also learnt it the hard way that index funds are better.

It is not the number that decides too many funds. You may have just 3 funds but their holding patters may show 85% to 90% overlap, so it is like having one fund only. So do look at the holding pattern by checking their portfolio and allocation percentage.

[K_Drive]

Very interesting discussions. I have following funds in my folio :

DSP Nifty 50 Equal Weight Index Fund - Dir - Growth - SIP
Edelweiss Greater China Equity Off-shore Fund - Direct Plan Growth - SIP
SBI Small Cap Fund Direct Growth - SIP
HSBC Small Cap Fund - Direct Growth (Formerly known as L&T Emerging Businesses Fund Direct Growth) - On Hold
HDFC Mid-Cap Opportunities Fund - Direct Plan - Growth Option - SIP
Mirae Asset NYSE FANG+ ETF Fund of Fund - Direct Plan - SIP
Parag Parikh Flexi Cap Fund - Direct Plan - SIP
Tata India Consumer Fund Direct Plan Growth - On Hold

Among these "Edelweiss Greater China Equity Off-shore Fund" is the one having negative returns for past 2yrs. This is a debt fund and I added this fund for diversification. Since China is going through economic slowdown, is it wise to stick with this fund or should I book loss and move the fund to a different one? Similarly "Tata India Consumer Fund" is also not performing well. When will be right time for moving this to a midcap fund?

[thirugata]

Originally Posted by K_Drive

Very interesting discussions. I have following funds in my folio :

I would like to know the thought process behind choosing these funds.

I see 1 largecap/Index fund, 2 smallcap funds, 1 midcap fund, 2 global equity/international market + PP flexicap which also invests significant portion into US market and a sectorial fund.

Looks like a very aggressive portfolio. Nothing wrong with it, but would like to understand the thought process behind a PF like this.

[Neomobile]

Originally Posted by K_Drive

Very interesting discussions. I have following funds in my folio :

Yes I would like to know your thought process too. Why equal weight and not a Nifty 50 fund? Why consumer sectoral fund but not an IT or Auto sectoral fund? Why China fund but not a Nasdaq 100 fund? What is your thought process in deciding on these funds?

[K_Drive]

Originally Posted by thirugata

I would like to know the thought process behind choosing these funds.
Looks like a very aggressive portfolio. Nothing wrong with it, but would like to understand the thought process behind a PF like this.

Below was my thought process. When I started SIP 6yrs back, I want to have mix of smallcaps, midcaps and one safe bet which I was considering for building my retirement corpus. So with my limited knowledge, I started with following funds.

DSP Nifty 50 Equal Weight Index Fund - A friend recommended me.
SBI Small Cap Fund Direct Growth
HSBC Small Cap Fund - Direct Growth (Formerly known as L&T Emerging Businesses Fund Direct Growth)
HDFC Mid-Cap Opportunities Fund - Direct Plan - Growth Option
Tata India Consumer Fund Direct Plan Growth

Among these, DSP was my safe bet. Couple of years back, idea of diversification struck. So I decided to invest in US and Chinese market though indirect route. Hence started SIP in NYSE FANG+ ETF (15% of monthly SIP)and Greater China Equity funds (7% of monthly SIP). As monthly income improved and some of the chit funds closed, I thought of increasing the exposure to US funds. Hence started PPFC, which got 30% exposure to US markets and increasing total exposure of my portfolio to US market by 20%.

Originally Posted by Neomobile

Why equal weight and not a Nifty 50 fund? Why consumer sectoral fund but not an IT or Auto sectoral fund? Why China fund but not a Nasdaq 100 fund? What is your thought process in deciding on these funds?

To be honest, I wasn't sure about the difference Nifty 50 index fund and equal weight fund and how will it impact on long run. I subscribed to the NFO because of the euphoria of starting SIP. At that time Tata India Consumer Fund was doing good with good past 5yrs performance. I thought it will act as defensive fund as my exposure to small/mid cap was high. For past couple of years, I stopped SIP on Tata India Consumer Fund and L&T Emerging Businesses Fund and increased weightage on SBI and HDFC midcap funds. So my current weightage is 60% on mid/small cap, 30% on large cap and 7% on China fund. I'm 37 now with limited/no liability. So I'm willing to take risk by continuing to SIP on mid/small cap funds for another 10yrs(if everything goes right).

[Neomobile]

Originally Posted by K_Drive

To be honest, I wasn't sure about the difference Nifty 50 index fund and equal weight fund and how will it impact on long run. I subscribed to the NFO because of the euphoria of starting SIP. At that time Tata India Consumer Fund was doing good with good past 5yrs performance. I thought it will act as defensive fund as my exposure to small/mid cap was high. For past couple of years, I stopped SIP on Tata India Consumer Fund and L&T Emerging Businesses Fund and increased weightage on SBI and HDFC midcap funds. So my current weightage is 60% on mid/small cap, 30% on large cap and 7% on China fund. I'm 37 now with limited/no liability. So I'm willing to take risk by continuing to SIP on mid/small cap funds for another 10yrs(if everything goes right).

Okay. I cannot say more as I am not a certified or registered advisor, except that keep an eye on your asset allocation, have enough savings in bank or liquid funds for easy access as mid and small caps are very volatile and may be in a big drawdown phase when you may want to liquidate them. I cannot advise on specific strategy due to the limitations mentioned above, but do understand market cycles and shift money from equity to debt and vice versa. Also sectoral funds are risky unless you understand the underlying economics and proper timing.