Fund Talk

This is the first time I am investing money in mutual fund through the SIP mode. I have SIPs of Rs 2000 per month in each fund for 10 years. I want Rs 40 lakh after 10 years to own a home and car. Will it be possible to achieve the target amount with the current SIPs in the funds mentioned below? HDFC Top 200, Birla Sun Life Dividend Yield Plus, DSP BlackRock Top 100, IDFC Premier Equity and HDFC Prudence.

Brajesh K Mishra

Hyderabad

We hope you have taken in to account the possibility of property appreciation as well as inflation effects when you set your goals. This is a crucial part of setting a target. Hoping you have done this calculation, Rs 40 lakh in 10 years would be a tad difficult, assuming that at least two of your funds can manage a 20 per cent annual return and the rest generate at least 15 per cent. It is better to be conservative in one's return expectations and enjoy unexpected gains, if any, later! At the above rate of return, your current saving will generate only Rs 25.5 lakh at the end of nine years.

Increase savings

We do not wish to drag the process of reaching your goal till the tenth year as we feel it is wise to get out of equities a year or even two before your goal by sweeping money in to safer avenues. Any market mishap nearer to your goal may otherwise send your goals for a toss. Hence, at a 15 per cent annual return you would be required to up your SIP by another Rs 4,000 per month from next year (for eight years) and another Rs 5000 the year after that (for another seven years). This would help reach your target. If you can spare these sums immediately it is even better.

We would like to make some minor rejigs to your portfolio. Hold on to HDFC Top 200 and exit DSPBR Top 100. While the latter is a good fund, it would suffice to have one large-cap fund in your portfolio. Instead move to UTI Opportunities. The fund would be more dynamic in terms of spotting and benefiting from sector or market trends. Continue SIPs in the rest of the funds.

When you add the two new SIPs in the next couple of years, you can consider investing in HDFC Equity and increase exposure to IDFC Premier Equity as well as Birla Sun Life Dividend Yield Plus.

If you have any surplus beyond this, you can look at investing in Benchmark's CNX 500 index fund. However, do not attempt this in the last three or so years before your goal. Invest only if it is possible in the next three years. Also remember that while SIPs may be long term in nature, review of performance or switching to better funds when returns lag benchmark for over a year is very important.

*****

I am investing Rs 22, 000 a month in the following mutual funds by way of SIP. I plan to continue this investment for the next five years for my son's education. I am finding it difficult to keep track of the funds. Kindly let me know which SIPs to continue and which to exit. Tata Infrastructure, Reliance Equity Opportunities, DSPBR Equity, Birla Sun Life Top 100, Reliance Growth, SBI MSFU, Reliance Regular Savings Equity, Sundaram Select Midcap, DSPBR T.I.G.E.R, HDFC Equity, ICICI Pru Discovery, Birla Sun Life Frontline Equity, Birla Sun Life Midcap and DSPBR Top 100.

Vijay K Kamat

You will not only need a compact portfolio but a set of steady performers given that you do not have too long a time left to reach your goals. Given the volatile nature of the market and your entry in to some of the funds in 2010 closer to market peak, it may be wise to stick to funds that provide some downside protection and return at least 12-15 per cent per annum.

Such returns would help build a corpus of Rs 13.5-14.4 lakh at the end of four years. If your portfolio struggles to deliver this return in the next 2-3 years, you would have little choice but to up your savings. After four years when you reach the required corpus whichever is early, consider using a systematic transfer plan to shift the money to safer short-term debt funds or move to one-year bank deposits. The funds you hold can be trimmed but have to be periodically reviewed nevertheless. You can use any of the free online tools available to load your investment details as a one-time job. It would help you keep track of your funds' performance.

Compact size

Moving to your portfolio, we would not risk any SIPs in theme funds such as infrastructure as they require active tracking and profit booking. We therefore suggest you stop SIPs in Tata Infrastructure and DSP BR T.I.G.E.R. Shift these to UTI Opportunities. Also switch from Reliance Equity Opportunities to the UTI fund. Shift the money in Birla Sun Life Top 100 to Birla Sun Life Dividend Yield Plus and holdings in Birla Sun Life Frontline Equity to DSPBR Top 100.

Returns of large-cap funds would be capped given their restricted investment universe. Holding one of them would do. You have not mentioned the name of your SBI fund; exit it nevertheless. Also sell Reliance Growth and Reliance Regular Savings Equity, which have been laggards for sometime.

Instead, start SIPs in HDFC Equity. Switch from DSP BR Equity to HDFC Equity, as the latter is a superior performer. Retain ICICI Pru Discovery. Exit Sundaram Select Midcap and Birla Sun Life Midcap and instead start SIPs in HDFC Midcap Opportunities. This will reduce your 14 funds to six, weed out underperformers and remove duplication.

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