Mutual fund shares: Can a mutual fund investor also invest in shares?

I am 23 years old. I have 20-30 years to invest. I invested in Axis Bluechip Fund, Axis Midcap Fund, Parag Parikh Flexi Cap Fund and HDFC Sensex Plan via SIP mode of Rs 5,000 per month in each of the funds. Is my mutual fund portfolio good or do I need to change something? If I can invest 25,000-30,000 rupees per month, what should be the percentage allocation to direct stocks and mutual funds?

If I am investing in direct shares, since I am already investing in MF, what type of shares should I invest so that there is no overlap?

Please advise me on the above points.

–Ashutosh Pal

Answered by Rushabh Desai, Founder, Rupee With Rushabh Investment Services:


You started your investment journey at a young age. This is very good and it will give you enough time for your portfolio to compound and generate optimal returns. Since you haven’t mentioned your goal and risk appetite, given your age and time horizon, I’m guessing your goal is wealth creation, probably for your retirement and your risk appetite is raised.

You have invested in all high quality funds managed and supported by experienced managers and their teams with strong track records. Thus, I see no reason to change any of your existing funds at this point. But you’ve allocated 50% to pure, large-cap funds and I’d like you to reduce that exposure, especially given your age and investment time horizon. Since you don’t have a small cap fund in your portfolio, I recommend adding a fund from that category.

As you can invest up to Rs 30,000 per month, you can start a new SIP and allocate Rs 5,000 to your small cap fund. You can also consider investing in a US based index fund, you can invest around 10-15% of your overall SIP portfolio, as the Parag Parikh Flexi Cap Fund is already gaining some international exposure in its portfolio.

Finally, I will not recommend that you invest directly in stocks as all of the above mutual funds are purely stock-focused and are managed by highly qualified and experienced professionals to generate optimal long-term returns. Since you are only 23 years old, you may not have the knowledge and experience to pick the right stocks and assign them the appropriate allocation. Apart from that, it is very important to buy and sell stocks at the right time and at the right price. These are just some of the complications. All of this can become very difficult for you. But if you think you have the knowledge to trade and invest directly in stocks, you can venture out at your own risk.

Dolores W. Simon