Should I continue investing in Mutual Fund schemes despite rating downgrade?

— Name withheld on request

It is important to know the investment horizon, risk appetite and goals of an investor before suggesting an investment approach. Suppose one is investing for long term (more than 7-8 years) and has aggressive risk taking ability, in that case, one can think of building a portfolio around equity as it has better returns ability to give. If one is investing for the medium term (more than 3-4 years), he/she can consider investing a major portion of the portfolio in dynamic asset allocation in the hybrid category. As you have mentioned that you are a long term investor, we assume that your risk appetite is aggressive, and the investment objective is to create wealth over time.

As far as your current investments are concerned, it is purely equity-oriented, with a large-cap bias. We would suggest building a portfolio in equities in categories that maintain exposure across market capitalization. Hence, you can rebuild your portfolio and divide your total monthly investible amount equally among the following funds: HDFC Large & Mid Cap Fund, Kotak Multi Cap Fund and SBI Contra Fund. This way, your portfolio will be diversified across categories, geography and AMC. It is also advisable to review your portfolio at least once a year.

This question has been answered by Rajiv Bajaj, Chairman and Managing Director of Bajaj Capital Limited. If you have any personal finance questions, write to mintmoney@livemint.com to get them answered by experts.