My HDFC Top100 mutual fund has been generating 14% returns over a decade. Should I stop SIP or keep investing?

I have been investing in the HDFC Top100 Growth fund for around 13 years, starting with Rs 5,000 and gradually increasing to 17,000 and the XIRR is 14.64 per cent now. The invested amount is Rs 18,77,935, and the current market value is Rs 34,51,700. My question is, is this a good fund? Should I keep on investing? Also, should I stop this and start a new one? If a new fund, kindly suggest which one.

Reply by Rajiv Bajaj, Chairman & MD, Bajaj Capital

Prior to making any investment recommendations, it is imperative to thoroughly understand an investor’s unique financial profile, which includes their investment horizon, risk tolerance, and financial objectives. These factors play a pivotal role in determining the most suitable investment strategy. For instance, when dealing with an investor who possesses a long-term investment horizon and a high appetite for risk, it is advisable to consider constructing an equity-oriented portfolio that can capitalise on the potential for substantial growth over time.

Currently, it is apparent that your existing investment portfolio exhibits a significant concentration risk. This concentration is primarily due to the heavy reliance on a single scheme within the large-cap category. Such a high level of concentration can expose your investments to undue vulnerabilities associated with the performance of a single asset. To mitigate this concentration risk and enhance the overall resilience of your portfolio, we recommend adopting a strategy of diversification.

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Diversification entails the allocation of your investable funds across various market capitalisation segments and asset management companies (AMCs). In your case, given your total monthly investable amount of Rs 17,000, we propose a diversified allocation strategy that can help balance your risk and maximise your potential returns. To achieve this, we suggest distributing your monthly investment among a carefully selected group of mutual funds:

1. HDFC Mid Cap Opportunity Fund 
2. Nippon India Multi Cap Fund    
3. Kotak Multi Cap Fund    
4. Franklin India Flexi Cap Fund    
5. HDFC Top 100 Fund (Existing)    

By distributing your investments across these diverse mutual funds, your portfolio will effectively span across multiple market capitalisation categories and different AMCs. This prudent approach serves to reduce concentration risk while harnessing the growth potential of a broader array of investment options. In doing so, you are better positioned to weather the fluctuations in the financial markets and potentially attain a more balanced and resilient investment portfolio.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)