Fund Talk

I am 57 years old. I have the following SIPs, which were started about a year ago: Monthly investments of Rs 5000 each in HDFC Top 200 and ICICI Pru Discovery and SIPs of Rs 4,000 each in HDFC Equity and Sundaram Select Midcap.

I have invested Rs 2,000 a month each in ICICI Pru Dynamic Plan, Franklin Flexicap and BSL Frontline Equity and Rs 3000 a month in DSRBR Small & Midcap. More recently in July 2011, I have started SIPs in Tata Dividend Yield, Reliance Equity Opportunities (both Rs 2,000 each) and Rs 4,000 in HDFC Balanced. My exposure to direct equity and mutual funds is about 35 per cent of my assets. Other Investments are in Bank FDs, public provident fund. liquid funds and so on. I can invest a further Rs 25,000 on SIPs recommended by you. I do not need the money now and I can wait for 4-5 years.

Please comment on my present and planned investments.

Sampath

It is good to note that you have a fairly balanced asset allocation strategy. Given your age, investing 35 per cent of your liquid assets in equity and mutual funds seems to be in order, though judging by your risk-appetite and willingness to plough more into SIPs, that percentage can be increased to around 40.

Having said that, your mutual fund portfolio appear to lack any specific strategy or focus. Although you have a sizeable sum of Rs 35,000 to spare for investments every month, you can still keep your portfolio to a few select funds with a track record of consistent performance.

Coming specifically to your portfolio, with as many as 11 funds, there needs to be considerable trimming to get the total number to around six. You can exit ICICI Pru Discovery and Sundaram Select Midcap and instead direct the proceeds to IDFC Premier Equity. The later will give you reasonable exposure to mid-caps with limited volatility. Increase contribution to HDFC Top 200, a large-cap fund. Some of the investments in HDFC Equity can be shifted to HDFC Top 200 as the requisite midcap exposure that the former provides is adequately provided for by IDFC Premier Equity. Please note that HDFC Equity continues to be one of the best performing fund and our recommendation is to merely rebalance your portfolio.

You can also exit Franklin Flexicap, Birla Sun Life Frontline Equity, and Tata Dividend Yield as their performance has been lackadaisical over a protracted period of time. Take exposure to ICICI Pru Focussed Bluechip Equity and Birla Sun Life Dividend Yield Plus, which have delivered attractive returns over the past 3-4 years.

To sum up, invest Rs 8,000 each in HDFC Top 200, IDFC Premier Equity, ICICI Focussed Bluechip Equity and Birla Sun Life Dividend Yield Plus.

Continue your SIPs in HDFC Balanced and increase the sum invested in Reliance Equity Opportunities to Rs 4,000.

Given that your time-horizon is 4-5 years, we have desisted from giving you an aggressive portfolio. We have focussed on creating a core-satellite approach with steady returns being a priority. All these investments would total up to Rs 40,000, which is Rs 5,000 more than your current monthly outflow.

If you were to invest Rs 25,000 more as you had stated, it would drastically alter your asset allocation. Hence, stick to this current value of SIPs and use more debt options for the surplus.

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I am a 40-year-old lecturer from a private college. I am new to mutual funds. I want to invest over 15-20 years till my retirement. I have Monthly SIPs of Rs 2000 in HDFC Sensex plan, HDFC Prudence, HDFC Top 200 and Goldman Sachs Nifty Bees. Is it correct to have three funds from HDFC alone?All my funds have negative returns. Please comment on my portfolio.

Renuka

You have invested in two funds that track key indices. It is important to note these funds will only deliver as much as the underlying indices as they are simply mandated to mimic the performance of their respective indices. They do not take active calls like other diversified funds.

In the Indian context, especially over the last 15-20 year period,actively managed funds have delivered superior returns compared with key indices by choosing stocks that would outperform. Such outperformance can be expected to continue at least until our markets become as mature as the developed country markets. Our suggestion is that you exit HDFC Sensex Plan and Goldman Sachs Nifty Bees. Invest in Fidelity Equity and IDFC Premier Equity. You can retain the other two funds.

Investing in funds from the same house is not necessarily bad, but you would lose out on different investing styles of other asset management companies and potentially higher returns or varying risk profiles. Since the broader market has been in a corrective mode over the past one year, most funds and indices have delivered negative returns. Hence do not expect the suggested funds to outperform immediately.

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