Wednesday, January 11, 2023
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I am investing in these four funds


A reader says, “Sir, I am 26 years old. After reviewing various materials and videos about funds, I have arrived at a four-fund portfolio with all hybrid funds. Kindly suggest changes or give your thoughts on this. The funds are (1) Hdfc balanced advantage fund – (20%), (2) Icici prudential equity and debt fund – (20%), (3) Quant absolute fund – (20%), (4) Nippon India multi-asset fund – (40%).”

At 26, this is an atypical portfolio! Most people your age would stock up on mid cap and small cap funds in the hope of “getting better returns.” So I am pleasantly surprised.

At first sight, the portfolio might seem like unnecessary clutter with a lot of overlap or potential for overlap. However, age and experience have taught me that there are many ways to reach a destination (provided a plan is in place), and this is one.

That said, at 26, your portfolio is still young. So I would urge you to consider using index funds. They are the simplest to maintain, and you can focus your time and energy elsewhere.

If, however, you prefer actively managed funds and, in particular, this mix of hybrid funds, there is nothing wrong with your chosen combination. No one can say which mix of funds (active or passive) will “work” in future. We make a choice, review regularly and course correct as required. For the time being, you don’t need to do anything.

Some considerations:

  • Do not assume you are going to continue investing in these funds forever. Star ratings change; performance varies; expense ratio changes; strategies change; fund managers change; AUM swells etc. So be ready to change funds without worrying about tax. This is the main reason index funds are the best choice, especially for someone your age. Such risks are eliminated.
  • In any case, do not add more funds to your portfolio.
  • As and when you get additional long term goals (e.g. children’s education), you can consider using the same funds for that as well (the unified portfolio approach)
  • Review the portfolio once a year from top to bottom. That is goal first (corpus required) –> asset allocation –> fund performance. Do not hesitate to rebalance the portfolio if the asset allocation deviates by 5%.

At 26, your primary goal should be financial independence; for this, you need about 50-60% of equity and the rest in fixed income. So this should be your priority. Next, your goal should be to increase your yearly investments by at least 10%. For this, your skill set and salary should increase. So focus on that. We wish you all the best.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.


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Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!

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