Fund Talk

I recently started investing in mutual funds through SIPs and will continue to invest for 20 years or so for my retirement and for my children’s education/marriage. I am currently allocating Rs 2,500 each in HDFC Top 200 and Reliance Equity Opportunities. I am thinking of investing another Rs 2,500 each in ICICI Pru Focused Bluechip and IDFC Premier Equity.

Is my portfolio appropriate for my goals? I was thinking of moving my allocation from HDFC Top 200 to ICICI Pru Focused Bluechip as the former has lost some of its charm recently.

Anant Tandon It is nice to note that you have given yourself a long timeline of 20 years to save for your retirement. You have also done the right thing by investing in mutual funds regularly to save for your goals.

The funds that you are currently investing in are quite good. HDFC Top 200 is a large-cap fund with an excellent long-term track record. Reliance Equity Opportunities is a multi-cap fund though it invests significantly in mid-cap stocks. It has performed quite well over the past few years. You can retain both these funds. The other two funds that you have chosen — ICICI Pru Focused Bluechip and IDFC Premier Equity — have a steady track record of delivering returns over the long-term too. The former is a large-cap fund, while the latter is a mid-cap scheme. You can invest in both of them.

Coming to your question on HDFC Top 200’s underperformance, you must not be too fazed by its recent show. It has delivered returns across market cycles and is definitely a good bet for the long-term.

*** I have invested in the following funds through SIP mode from December 2011: HDFC Top 200, Rs 1,000; DSPBR Top 100 Equity, Rs 1,000; IDFC Premier Equity, Rs 2,000; Reliance Gold Savings, Rs 1,000; ICICI Pru Focused Blue Chip, Rs 1,000; Reliance Equity Opportunities, Rs 1,000; UTI Opportunities, Rs 1,000. In addition to the above investments, I have started another SIP of Rs 2,000 from this month. Please comment on the selection of funds and also let me know if any pruning is required.

Siva Manjery You have chosen a set of funds that have a fairly steady track record. But you have spread your investments across too many funds which leads to overlaps in portfolio holdings.

For the Rs 10,000 that you are investing (including the additional Rs 2,000 SIP started recently), you need not have more than 4-5 funds in your portfolio.

Invest Rs 2,500 each in HDFC Top 200 and ICICI Pru Focused Bluechip Equity. Both are large-cap funds that are designed to deliver steady returns over longer investment horizons. Since you already have a couple of large-cap funds in your portfolio, you can exit DSPBR Top 100 Equity, a fund with a reasonable scorecard. Invest Rs 2,000 in IDFC Premier Equity.

Now, both Reliance Equity Opportunities and UTI Opportunities are multi-cap funds with a strong performance record. Choose Reliance Equity Opportunities, if you want a riskier mid-cap oriented bet. But if you are looking for a more large-cap bias and relative safety, invest in UTI Opportunities. Invest Rs 2,000 in either of these funds. Park the remaining Rs 1,000 in Reliance Gold Savings fund for portfolio diversification.

Review the funds in your portfolio periodically and take corrective action, if necessary, and also to rebalance your portfolio.

*** I am 26. I am working in an IT company. I plan to invest in mutual funds for the first time. I have decided to invest in five schemes, parking Rs 2,000 (SIP) in each, out of which one has to be an ELSS fund for tax purpose. Please suggest some good funds from the equity, hybrid and ELSS categories for the long term (3-5 years).

Debashish Rout You have done the wise thing by starting early in investments, especially in mutual funds.

While building your portfolio, try to strike a balance in allocation between equity, debt, gold and real-estate depending upon your risk appetite, surplus and time horizon.

Coming to your queries, please note that every SIP investment that you make in an ELSS scheme is locked for three years. You can also consider opening a PPF account for tax saving purposes.

Spread your investment as follows: Invest Rs 2,000 each in Quantum Long Term Equity, IDFC Premier Equity, ICICI Pru Focused Bluechip and HDFC Balanced. These will give you exposure to large-, mid- and multi-cap funds as well as a balanced scheme for stability. As your surplus rises, increase your contribution in the above funds.

For tax purposes, you can invest Rs 2,000 in Canara Robeco Equity Tax Saver.

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