How to diversify my mutual fund portfolio?

I am currently investing in four mutual fund schemes: HDFC Balanced Fund, SBI Bluechip Fund, DSPBR Tax Saver Fund and Mirae Assets Emerging Bluechip Fund. My investment horizon is above seven years, and have already completed 1.5 years with these funds. If I am not wrong, all the funds that I hold are equity based. Should I be looking at other options to diversify? If I want to add more to my investment portfolio, how should I diversify?
-- Shravan Raghunath

Chokkalingam Palaniappan, Director, Prakala Wealth Management, responds:

You have invested in a balanced scheme, a largecap scheme, a tax saver scheme and a midcap scheme. All the four funds are performing well. If you do not need tax savings under Section 80C, then you may stop investing further in DSPBR Tax Saver Fund. You have not mentioned your age and the purpose of these investments. Yes, all your funds equity-oriented funds. Other than equity, you may look at the following asset classes to diversify your investments: debt funds, gold, and real estate.


For investing in real estate you need decent money. You may look at Sovereign Gold Bonds issued by government of India. Simplest way to diversify immediately is to invest in debt funds. On the debt side, you may invest in Franklin India Low Duration Fund or Invesco India Credit Opportunities Fund depending on your risk profile. The former comes with higher returns and lower grade investments whereas the later comes with lower returns and higher quality papers.